Diesel fuel prices have surged to record highs, rattling transportation companies that form the backbone of the American economy.
Prices for diesel, used to power trucks and trains, reached an all-time high of approximately $6.31 per gallon on Wednesday, according to AAA data.
The spike represents a more than 70% increase from a year ago, with analysts attributing the supply shock directly to the U.S. war with Iran.
“We have seen some of the most radical and abnormal swings in fuel prices that I think we’ve ever seen,” said Brad Delco, finance chief at trucking company J.B. Hunt, at a Morgan Stanley industry conference.
Delco warned investors to expect a drop in earnings between 5% and 10% from the second to third quarter as a direct result of higher fuel costs.
Shares of J.B. Hunt (JBHT) dropped more than 13% in Wednesday’s session, marking one of the worst single-day performances for the stock since its 1983 public debut.
The Dow Jones Transportation Average, a broader gauge of the sector, closed down close to 3% on Wednesday, with J.B. Hunt ranking as the index’s biggest loser.
Patrick De Haan, head of petroleum analysis at price tracker GasBuddy, warned that diesel-related price pressures will intensify further, with the national average potentially eclipsing $6.50 within two days.
Midwest states including Michigan, Ohio, and Illinois may see per-gallon diesel prices touch $7 in the coming days, according to De Haan’s estimates.
In California, AAA found that the average rate for a gallon of diesel has already surpassed $8, with prices climbing almost 20% in the last month alone.
“We’re talking about $6 diesel, but out here, it’s $8 diesel, we noticed on the way in, which is like science fiction,” said Claude Elkins, chief commercial officer at railway transporter Norfolk Southern, at the Morgan Stanley conference in Laguna Beach, California.
Elkins said he keeps a “very cautious eye” and has ongoing conversations about what those price levels will “mean for the economy,” adding, “That certainly is something that we have to keep our eyes open to.”
“Ultimately, over some period of time, that’s going to be a drag on the consumer out there,” Elkins continued, underlining the sector’s broader concern for American households.
The transportation services sector contributed $1.9 trillion to the U.S. economy in 2024, accounting for more than 6% of total enhanced gross domestic product, according to the Bureau of Transportation Statistics.
Diesel’s record-setting rise colliding with the fall harvest season means costs will balloon for producers of crops like corn and wheat, according to Jacob Aiken-Phillips, head of consumer and retail research at Melius Research.
Aiken-Phillips said fuel-related inflationary pressures should be absorbed first through farmers, transporters, and retailers before being passed down to consumers in the form of price hikes.
George Gianarikas, an analyst at Canaccord Genuity, told clients Wednesday that rising fuel prices could accelerate demand for autonomous trucking and electric freight offerings across the transportation sector.
Retail sales did climb 1.2% from July to August despite energy-related inflationary pressures, offering some counterbalance to the alarming fuel cost trajectory.
