‘Science fiction’: Transport companies — the backbone of economy — are sounding alarm on fuel prices

Transportation companies, essential to the U.S. economy, are raising the alarm over soaring diesel prices. As of Wednesday, diesel costs reached a record high of approximately $6.31 per gallon, according to AAA data. Diesel prices have surged by over 70% compared to last year, a phenomenon analysts link to supply shocks caused by the U.S. conflict with Iran.

According to Brad Delco, finance chief at J.B. Hunt, a prominent trucking firm, the transportation industry is experiencing some of the most extreme and unprecedented fluctuations in fuel costs. Delco projected a potential 5% to 10% drop in earnings for the second to third quarter due to increased expenses. J.B. Hunt's stock plummeted by more than 13% in Wednesday's trading, marking one of the worst single-day declines since the company went public in 1983.

The Dow Jones Transportation Average, a broader benchmark for the sector, fell nearly 3% on the same day. Analysts expect the diesel-related price pressures to escalate in the coming days, with the national average potentially crossing $6.50 within two days, according to Patrick De Haan, GasBuddy's head of petroleum analysis. Midwest states like Michigan, Ohio, and Illinois may witness per-gallon diesel prices reaching $7 in the near future, De Haan estimates.

California already sees diesel rates surpassing $8 per gallon, nearly 20% higher than a month ago, as per AAA's statistics. Claude Elkins, chief commercial officer at railway transporter Norfolk Southern, likened the situation to "science fiction," expressing deep concern about the economic implications of such high prices. The transportation sector contributed $1.9 trillion to the U.S. economy in 2024, constituting over 6% of the nation's GDP.

Elkins emphasized the need to remain vigilant about the potential economic drag stemming from these rising costs. Despite retail sales increasing by 1.2% from July to August, the impact of energy-related inflationary pressures on fuel prices may soon trickle down to consumers in the form of higher grocery and dining expenses. Jacob Aiken-Phillips, head of consumer and retail research at Melius Research, noted that the initial burden of higher inputs, such as fuel, is likely to be absorbed by farmers, transporters, and retailers before being passed on to end-users.

Some industry analysts believe that rising fuel costs could stimulate demand for autonomous trucks and electric freight solutions, although this perspective is yet to be validated.