Diesel costs about $2.67 a gallon more than it did a year ago, and that cost does not stay at the pump. It reaches a local business through supplier fuel surcharges, shipping bills and its own delivery and service trips, so this is a good week to find out where it is landing in your books.
What happened
AAA says the national average for diesel was $6.37 a gallon on Friday, October 2. That is close to the record of $6.53 set on September 22, and about $2.67 more than a year ago (AAA gas prices, figures as of October 2).
Gas is high too. Regular averaged $4.33 a gallon in September, the highest for any September on record and 50 cents above the old September record from 2023, AAA reported. That is a record for the month, not an all-time high. Regular was about $4.40 on Friday, still below the all-time record of $5.02 set in June 2022.
Fuel climbed as the war involving Iran, blocked export routes in the Persian Gulf and Russian export bans squeezed supplies, BNN Bloomberg reported. AAA said crude oil has slipped back into the $90 a barrel range, which has eased gas a little.
What the G7 reserve release might change
On Friday, the G7 (the U.S. and six other large economies) agreed to release up to 100 million barrels of diesel and crude oil from emergency reserves over four months, working with the International Energy Agency (IEA). A large share is due out in the first 20 days, UPI reported. In the same story, IEA head Fatih Birol said oil prices began slipping right after the news.
Michael Lynch of the Energy Policy Research Foundation said the release could cut U.S. diesel by about 25 to 50 cents a gallon after a few weeks (BNN Bloomberg).
Nothing is certain. In the same story, Pavel Molchanov, an analyst at Raymond James, said it was unclear whether these barrels are new or the last part of a release already promised in March. Jim Krane of Rice University’s Baker Institute warned that any price relief would be temporary and would cost Europe some of its emergency supply.
Even the best case leaves diesel expensive. By our math, a 50-cent drop from Friday’s average would put diesel near $5.87, still more than $2 above where it was a year ago ($3.70).
How diesel reaches your costs
Through everything you buy. Most goods ride on diesel at some point, by truck, train, ship or barge, and most U.S. farm and construction machines burn it too, the U.S. Energy Information Administration says. So food, parts, building supplies and store inventory all carry some of the cost.
Through fuel surcharges. Some carriers and suppliers add a fuel surcharge that rises and falls with diesel. FedEx shows how this works. Its Ground fuel surcharge is a percentage added on top of the shipping rate, and it resets each week based on the government’s weekly diesel price from about a week earlier. It was 29.75% for the week of September 28 and drops to 29.25% for the week of October 5.
That small drop followed a dip in the government’s weekly diesel price, which is a bit different from AAA’s daily average. It fell about 15 cents in a week, to $6.38 a gallon as of September 28 (EIA weekly diesel price, as of September 28).
The lesson: surcharges like this follow diesel down, but slowly and in small steps. By our math, using the table FedEx posts, a 25 to 50 cent drop in diesel would cut its Ground surcharge by less than two percentage points. A local distributor’s surcharge may follow its own rules, so it is worth asking how yours works.
Through your own trips. If you run delivery vans, service trucks or a catering vehicle, every trip costs more, whether it burns diesel or gas. The cost adds up fastest for businesses that drive a lot between jobs, like plumbers, HVAC techs, cleaners, landscapers and caterers.
Through your customers. Shoppers are feeling it too. In the Conference Board’s September survey, written comments about prices, especially fuel, reached a new high, the group’s chief economist said. That can make customers pickier about price just as your own costs go up.
What to do this week
- Find your surcharges. Pull the last two months of supplier and shipping invoices. List every fuel surcharge and delivery fee, and note when each one started or went up.
- Ask how they come off. Call your biggest suppliers and ask what their fuel surcharge is tied to and when it will drop if diesel falls. Write down the answers so you can check them in a few weeks.
- Bunch your trips. Book service calls and deliveries in the same area on the same day. Ask suppliers whether fewer, larger orders would cut your delivery or fuel charges.
- Track fuel by the week. Add up what you spend on fuel each week so you can see the trend and whether the G7 release shows up. The government’s next weekly diesel price comes out October 6.
- Price with care. If you are thinking about raising prices or adding a fuel or trip charge, be upfront with customers, and talk to your accountant or lawyer about how to show it on your bills.