When you buy an item in a store you might not think about how that item got there. You might simply see it, pay for it, and exit. Well, the item was likely driven to the store in a semi-truck. It’s how many items go from the factory to the shelves inside stores. However, many Americans are starting to realize just how important truckers are to the country.
Trucking is an important sector of the United States economy. It is how goods are transported to where they are needed. Earlier this year, the trucking industry began to see the harsh impact of high diesel fuel costs. Economists feared that the rise in costs would lead to a crisis. Recent reports show the cost of diesel fuel is starting to drop. Some are concerned with how long this downward trend will last.
What Causes a Rise in Diesel Fuel Costs?
According to the U.S. Energy Information Administration, a rise in diesel fuel prices is determined by four factors:
- The cost of crude oil by refineries
- Refining costs and profits
- Distribution, marketing, and retail station costs and profits
- Taxes (federal, state, county, and local government)
However, the price of crude oil is by far the largest factor in determining diesel fuel prices. Crude oil is a raw material used to make gasoline and diesel fuel. Since late 2021, the price of crude oil has been increasing. Many attributed that rise to the conflict between Russia and Ukraine. This didn’t just impact prices in the United States. It affected the global oil market in the form of higher diesel prices.
Higher Fuel Costs Causes Ripple Effect
High diesel prices heavily impact the trucking industry, which in turn, affects the country’s supply chain. Trucking companies have had to figure out creative ways to make money while battling high diesel prices. Some were concerned that the higher prices would cause the industry to reach a financial point, which it could not recover from.
Economists estimated that diesel prices rose over 76% in 2021. There are concerns that if the prices don’t drop low enough, it could lead some trucking companies to close their doors. This mostly applies to new businesses and smaller companies that operate with 20 trucks or less.
Some predict that if conditions don’t improve that customers will also begin to see more of an impact. If trucking companies shut down, drivers can not transport their loads to stores. This means that consumers would not have the items they want and need available on store shelves.
Are Diesel Fuel Prices Here to Stay?
Recent reports show that diesel prices are lowering. The question is: how long will this last? AAA says that diesel prices were under $5 per gallon as of August 2022. This is something many truck drivers have not seen in several months. It’s a positive sign that there could be some relief coming to drivers and trucking companies.
Early predictions say that if the cost of diesel fuel continues to drop, prices of goods may drop as well. Business owners have passed on some of the rising fuel costs to consumers. However, there is no real indication of what will be the outcome in the coming months.
Forerunner Insurance Group is Your Choice for Transportation Insurance
Don’t let a rise in diesel fuel prices distract you from protecting your business with insurance. Forerunner Insurance Group offers the best rates for commercial trucks, semi-trucks, dump trucks, heavy equipment, and more. Our goal is to provide our clients with the protection they need to grow their businesses. Find out how you can speak with one of our team members and get a quote by clicking here.
