Editorial: The Unwelcome Records in Fuel Prices
ith diesel prices hitting successive record highs, yet still trailing the even-faster run to new records almost daily in the crude oil markets, trucking will soon be hit more heavily in the pocket with rocketing fuel costs.
This is getting serious.
Last week, even a pledge by oil giant Saudi Arabia to run its taps wide open did little more than briefly take oil prices down from record levels. Within hours, new concern over threats against Iraqi oil exports had overwhelmed the Saudi offer and pushed crude prices higher.
Oddly enough, however, much of America hardly noticed what was happening to the spiraling cost of diesel fuel used in freight shipments, because the pump price was falling for gasoline that powers household vehicles.
Refiners finally had produced enough stocks of gasoline for the summer driving season, which was nearing its end anyway.
Still, oil priced this high will soon move beyond diesel or jet fuel to generate a new rise in the cost of gasoline and home heating oil. Truckers see the costs every time they fill up, and shippers are already complaining that trucking’s fuel surcharges are pushing up their freight bills, sometimes more than they can make up by raising prices on goods.
hat this all means to the economy was somewhat unclear last week.
The Federal Reserve reiterated its view that the recent economic weakness would be temporary, and it hiked interest rates another quarter-point as expected.
But the Fed said the slowdown had largely been a result of “the substantial rise in energy prices.” Well, at the time they issued their statement on Aug. 10, Fed officials were only in the second day of a wild week in oil prices. Prices would go higher, and the economic outlook potentially darker, nearly every day. By midweek, wire services had stories of economists growing more worried.
While heavy demand for freight services has certainly stressed carriers this year, soaring fuel prices could suddenly dampen that demand from shippers even as they raise the cost of hauling each load.
Most carriers reported solid profit growth in the latest quarter, but some carriers now say their surcharges and fuel-price hedging plans are no longer enough, as fuel burns away more of the profits.
This story appeared in the Aug. 16 print edition of Transport Topics. Subscribe today.
