Diesel prices have surged to an all-time high, sending shockwaves through the transportation sector and raising fresh concerns about broader economic stability.
The national average for diesel, the fuel powering trucks and trains, reached approximately $6.31 per gallon on Wednesday, according to data from AAA.
Prices have climbed more than 70% compared to a year ago, with analysts attributing the dramatic surge to supply disruptions stemming from 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 (JBHT), at a Morgan Stanley industry conference.
Delco warned investors to expect a drop in earnings of between 5% and 10% moving from the second to the third quarter as a direct result of escalating fuel costs.
Shares of J.B. Hunt fell more than 13% during Wednesday’s session, putting the stock on course for one of its worst single-day performances since the company went public in 1983.
The Dow Jones Transportation Average, a broad measure of the sector, declined more than 2% in midday trading, 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 pressures are set to intensify further in the coming days.
De Haan said the national average could surpass $6.50 within two days, with Midwest states including Michigan, Ohio, and Illinois potentially seeing per-gallon prices reach $7.
In California, AAA recorded the average price for a gallon of diesel already exceeding $8, with costs climbing nearly 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, speaking at the Morgan Stanley conference in Laguna Beach, California.
Elkins said he keeps a “very cautious eye” and regularly holds conversations about what elevated price levels will “mean for the economy.”
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.
“Ultimately, over some period of time, that’s going to be a drag on the consumer out there,” Elkins added, signalling concern about the long-term implications for household spending power.
Diesel’s record rise coinciding with the fall harvest season means costs will balloon for producers of crops such as 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 first be absorbed by farmers, transporters, and retailers before being passed on to consumers through higher prices.
George Gianarikas, an analyst at Canaccord Genuity, suggested that rising fuel prices could ultimately accelerate demand for autonomous trucking and electric freight solutions across the sector.