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HomeEconomySky-high diesel prices squeeze truckers, farmers, consumers

Sky-high diesel prices squeeze truckers, farmers, consumers

Long-distance truck driver Deb LaBree has a strategy to keep costs down as he sets out on the road to deliver medicines. She avoids the west coast and northeast, where diesel prices are highest. She organizes delivery routes to minimize the “deadheading” of driving empty trucks between deliveries.

And what if the customer’s luggage is too far or they can’t pay more for fuel? She refuses to work.

LaBree said, “It hurts me because I have to say ‘No, I can’t afford it’ or ‘I can, but you’ll have to pay some of my fuel to get me there’,” LaBree said. . . “I hate doing both because it’s not the customer’s fault. It’s not our fault.”

Diesel fuel prices have soared in recent months, much more than regular gasoline, especially after Russia invaded Ukraine in February. The Moscow attack caused many countries to turn away from Russian fuel, remove the main oil source, a major component of diesel fuel, from the market and sharply increase prices.

For months, drivers have been suffering from high gasoline prices. Many people may not know that they are absorbing the effects of much more expensive diesel fuel. That’s because what consumers buy, from cereal and orange juice to Amazon diaper delivery, is delivered by truck, train or ship powered by diesel engines. That inflated price is passed from company to company until it reaches the consumer in the form of a more expensive product.

Matt Smith, chief oil analyst at research firm Kpler, said, “The reason people pay less attention to diesel prices is that they’re going to pump and don’t use diesel.” “But diesel has a broader impact and is already having a major impact across the economy.”

Diesel fuel sold for an average of $5.52 a gallon nationally on Tuesday, a 68% increase from when it sold for $3.28 a year ago. In comparison, a gallon of regular gasoline averaged $4.50, up 42% from a year ago.

High gasoline prices have moderated somewhat in recent weeks. However, diesel has remained at chronically high levels, and US refineries have near-capacity. Unless prices are mitigated, the ripple effect of high diesel fuel could be exacerbated by the cost, as some trucking companies won’t accept jobs unless they can convince customers to pay more for fuel.

Longtime energy economist Phil Verleger has said that “there will be more logistical shortfalls.” “Americans will find more empty shelves and higher prices.”

Interviews with truck drivers and industry executives have shown that unless they are turning down jobs, many truck drivers are opting for lighter cargo or working longer hours to make up for fuel losses. Farmers harvesting hay and planting corn with diesel tractors are absorbing the financial blow. Delivery companies are installing their own fuel pumps to cut costs. In the end, the consumer bears the burden.

“If you’re a farmer, you’re paying more for energy, so it’s more expensive to produce grain,” said Smith, an analyst at Kpler. .

Diesel prices, which are higher than gasoline, are expanding the cost of goods because shipping costs have gone up so much. Consumer prices rose 9.1% in June compared to 12 months ago, the government reported last week. The share of fuel oil in the consumer price index nearly doubled compared to the same period last year.

“These energy costs are impacting a wide variety of consumer products in every way,” says Smith.

One reason diesel prices have not yet fallen as much as gasoline is that OPEC countries are slowing their oil supplies, and Middle Eastern oil generally produces more diesel fuel than parts of Texas. Another factor is that China has cut diesel exports, which it estimates will help it meet its net greenhouse gas emission target.

And within the United States, refineries that produce diesel from crude oil are inherently limited. According to the American Petroleum Institute, there are currently 11 fewer refineries operating in the United States than before the pandemic. A refinery that served the East Coast closed after an explosion in 2019 and never reopened. And some refineries in California have been closed for refurbishment to process renewable fuels.

“We use a lot of diesel, probably more than this refinery can produce,” said Bob Costello, chief economist at the American Trucking Associations.

President Joe Biden’s visit to Saudi Arabia last week was partly to encourage OPEC to produce more oil. This means more diesel fuel worldwide. Although no major deal has been announced, Prince Mohammed bin Salman has hinted that Saudi Arabia could potentially produce more oil.

But it may be unrealistic to expect OPEC to export more oil during the summer when demand is high, said Amy Myers Jaffe, an energy expert at Tufts University.

“The important thing is that our allies with OPEC do not reduce the flow to the market at any junction,” she said.

Even as U.S. oil and gas producers ramp up production, challenges remain, such as finding additional refining space and finding enough pipeline capacity to transport additional diesel.

In the meantime, some truckers are struggling to adapt as they keep moving their goods. Garner Trucking head Sherri Brumbaugh, who operates 90 trucks, installed more fuel pumps on site in Findlay, Ohio. Because she can get diesel cheaper than a truck driver can buy on the road.

She also monitors where drivers buy fuel to make sure they are making smart decisions. And she tries to absorb the higher fuel costs herself as much as possible.

But, she said, “Someday I have to go to the customer and say, ‘We need to increase this percentage.'” “

Brumbaugh declined to say how much she has raised rates for her customers, from bottled beverage companies to dishwasher manufacturers.

Recently, she said she has fewer retail cargoes to carry. “It could be a sign of a recession,” she said. “I hope not.”

Cargo Transporters, which operates 470 trucks and 1,800 trailers, has also raised rates and cut some jobs to Florida, where trucks often have to return without luggage, said company executive Shawn Brown. If there is no cargo on the truck, no one pays the trucking company. But drivers still have to pay and the fuel is still burning.

“If you run a mile without a trailer and no revenue, we’re eating it,” said Brown.

UPS and FedEx more than doubled their fuel surcharges for ground shipments year-over-year, according to calculations by Cowen Research and AFS Logistics.

Farmers also face higher costs. However, they often cannot raise prices easily because they do not control the price of the goods. For example, milk and grain prices are determined by the market.

David Fisher, a dairy farmer in Madrid, New York, president of the New York Farm Bureau, which is lobbying, said, “It costs more freight to deliver goods to the farm, and it costs more to transport goods.” Government on behalf of farmers. “We are planting and harvesting crops, and the cost will be higher, but I don’t know if we can make up for it.”

To burn less fuel, he is considering skipping the cultivator pass, where the tractor manipulates the soil to promote crop growth. However, doing so risks reducing the crop to be harvested.

A year ago, Fisher was spending $8,000 a week on fuel. He said this year the figure has reached about $20,000.

“Everyone I talk to is quite anxious about these fuel prices,” Fisher said.

Former Vice President Biden has asked Congress and the state to suspend gasoline or diesel taxes for months to ease the pain of drivers, but Congress appears reluctant to enact tax exemptions. Some states have temporarily suspended some taxes on diesel and other automotive fuels.

As high diesel prices persist, LaBree and her husband are working more hours to keep costs under control. They stayed on the road for four days and then returned to Missouri for three days. Now, she said, “I have to go out for five, sometimes six days to make up for my fuel loss.”

“Most truckers like to think we’re moving things for America and serving our country,” LaBree said. “But at what point are you doing it for free? You can’t do business that way.”

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