Supply chain on the brink of COLLAPSE as diesel price surge hits trucking industry hard

05/05/2022 / By Mary Villareal

The price of diesel has reached an all-time high of $5.321 a gallon, leaving the trucking industry reeling and the supply chain on the brink of collapse. Oil and gas prices have also increased, now standing at $4.187 a gallon, just a smidge down from the all-time high of $4.331 set on March 11.

The trucking industry relies heavily on the use of diesel fuel, and trucks that deliver food and other supplies from warehouses to retail stores require them, as well. The more expensive diesel gets, the more it will cost consumers to eat and live in general.

A year ago the average price of diesel was $3.086 a gallon, but now prices are about 72 percent higher. The average owner-operator doing 7,000 miles per month at around 6.5 miles per gallon can see his fuel bill jump by about $1,800 per month since the beginning of 2022.

These costs will eventually be passed on to consumers.

Patrick DeHaan, the head petroleum analyst at GasBuddy, said he does not see the situation improving drastically anytime soon. It will also take time and additional refining capacity to boost the supply of diesel and jet fuel back to adequate levels.

Ron Faulkner, the president of Faulkner Trucking and president of the California Trucking Association, wrote in an op-ed that truckers must increase the rates charged to haul freight if they want to cover the cost of diesel. These rates are then passed on to consumers through retail.

“So, you are paying for high prices of fuel both at the pump and at the grocery checkout line,” he said.

Faulkner noted that if truckers cannot afford to drive, then the goods will not move. If this happens, shelves will be empty at most grocery stores and it will become more difficult to find things that are normally easy to purchase. (Related: Rising gas prices to hit $7 a gallon if crude oil cost spikes and tension between Russia and Ukraine escalates.)

Trucking industry recession looms

Freight industry analysts suspect that the very fragmented and volatile trucking industry will experience another recession.

“We see when fuel surges as much as it has over the past couple of months, that’s usually when we see a lot of trucking bankruptcies follow,” said Craig Fuller, founder and CEO of Freightwaves, an industry data tracker.

This amounts to bad news for the nearly two million trucking companies in America, the vast majority of which are small businesses with a handful of trucks. Most of these are also small operators who are not always prepared and don’t have the balance sheets or the cash to absorb the shocks of these costs.

Tommy Davis, a small owner-operator, filled up his big rig in Mebane for $5.79 a gallon, costing him $1,300. However, he will have to fill up twice more on his trip to Fort Collins, Colorado. “For a small company, owner operator, we can’t keep doing it. The prices of everything are going up because everything moves with trucks,” he said.

Diesel is known as the fuel that moves the American economy.

Tim Kraft, a North Carolina State University Operations and Supply Chain Management professor, said the goods that Americans buy and purchase flow through the supply chain in trucks, boats and planes, which are fueled by diesel.

“So, when you see that diesel price goes up, the shipping cost goes up, which then translates to a higher cost of goods for the items that they’re shipping, so those higher costs are pushed onto us the consumer so we see higher prices that impact our wallet,” Kraft said.

“These levels that we’re seeing– the costs they’re having to pay — their margins are being cut in half. And it’s just not sustainable when you’re a small business and you’re seeing this much volatility.” (Related: White House turns to low-IQ TikTok influencers to put spin on why oil and gas prices are rising… cue ridiculous “explanations” by clueless celebs.)

Follow FuelRationing.news for more on rising diesel and gas prices.

Watch the video below for more insight into the continuous increase in gas prices.

This video is from the Dr William Mount channel on Brighteon.com.