In late summer, workers at Creekside Farming in Madera, California, prepare machinery to harvest almonds, a process that relies heavily on diesel fuel. Farm owner Jay Mahil reported that diesel prices have significantly increased, with the national average reaching $5.85 per gallon and California's average at approximately $7.71, according to the AAA motor club.
The rise in diesel prices is attributed to ongoing supply chain disruptions linked to geopolitical tensions, including the U.S. war with Iran. Mahil noted that his fuel costs have surged by 40% compared to last year, stating, "These higher costs come at the worst time for us. These are highly inundated time frames."
Fuel availability is also a concern, as Mahil mentioned that when prices dip, demand spikes, leading to shortages at fuel depots. California's diesel prices previously peaked at around $7.75 per gallon in April.
Greg Dubuque, general manager of a Montebello-based trucking fleet, indicated that his fuel expenses have increased from about $1,200 in April to $1,800. He remarked, "It’s a dramatic impact, especially for us smaller companies."
Gene Seroka, executive director of the Port of Los Angeles, highlighted that over two-thirds of cargo at the port is transported by trucks, with more than half of the 1,200 trucking companies operating there being small to medium-sized businesses facing challenges due to rising fuel costs.
The conflict in the Persian Gulf is causing cargo to reroute, increasing transit times and further elevating costs. Nick Vyas, a supply chain expert at USC Marshall School of Business, noted that while some companies may absorb costs, grocery prices are beginning to rise, particularly affecting perishable goods.
Diesel prices have surged by 7 cents overnight, 24 cents in the past week, and $2.14 compared to last year, according to AAA. Vyas explained that California's diesel prices are typically higher due to taxes and environmental regulations.
Larger companies can manage price fluctuations better than smaller businesses, which often lack the resources to hedge against fuel price increases. Dubuque is implementing strategies to mitigate costs, such as explaining the situation to customers and avoiding refueling in California when possible.
Economist Christopher Thornberg offered a more optimistic perspective, suggesting that while current prices are high, they are not unprecedented when adjusted for inflation. He noted that the diesel price spike is not as severe as past crises.
Despite this, the record high diesel prices are likely to have political implications, especially as the Republican Party approaches the midterm elections. AP-NORC polling indicates that approximately two-thirds of Americans disapprove of the president’s economic management.