Then the Iran war started and diesel prices posted the largest single week price increase ever recorded. 96.2 cents in one week. It broke records set when Russia invaded Ukraine. National averages or the national average blew past five dollars. As of this week, it’s five dollars and sixty four cents. California is over seven dollars a gallon and the EIA says it hasn’t peaked yet. They’re projecting close to five dollars and eighty cents in eight and sorry this month. This is gonna be an issue which would tie the all time record from June of 2022.

So picture what just happened. An industry that spent three years bleeding out, losing carriers, losing capacity, losing small operators who do the unglamorous work of what actually moving freight across the country. That industry just got hit with the most expensive fuel environment in four years. At the exact moment it has fewer trucks or the fewest trucks available to absorb it. The load to truck ratio, you know, which is how many loads are competing for each available truck hit a four-year high in March. Spot freight rates are the highest they’ve been since 2022.

The trucks that exited during the recession aren’t coming back. You don’t re-enter an industry that nearly killed you just because there’s all the sudden demand. Especially not when the fuel to run that truck costs $1,000 a fill-up. You think about how much fuel these trucks actually hold and how much they burn through. Three things converging at the same time we need to note. Diesel’s at a four-year high. The demand at a four-year high available capacity is at a multi-year low. That combination has never occurred simultaneously in the modern trucking era.

There is no historical comparison for what’s happening inside the industry right now and that matters to you even if you’ve never thought about trucking in your life because of what diesel actually is. See diesel is not gasoline. Most people don’t even know the difference and they’ve never had a reason to care. Gasoline powers your car. You see the price every time you drive past the station but diesel powers everything else and everything else is the part that determines what your life costs. 72% of all the freight in the United States moves by truck by value.

64% by weight more than four times as much as rail cars. 14.9 million trucks. 330 billion miles per year. 11.27 billion tons of freight. That’s not a system of the country and the operating system just got hit with a cost shock while running on its smallest workforce in years. Follow a loaf of bread. A diesel combine harvests the grain. There’s a fuel surcharge. Truck to the grain elevator. Fuel surcharge. Elevator to the flour mill. Another surcharge. The mill to the bakery. Surcharge. Eggs and milk arrive at the bakery by refrigerated truck.

Surcharge. Finished bread to the distribution center. You guess it right. Surcharge and then the distribution center to the grocery charge. You see my point? By the time you pick up the loaf of that loaf of bread, diesel has touched the price of that bread a minimum of four times. The number at the pump isn’t the number on the shelf. The shelf number is the pump number compounded through the entire chain and right now that chain is being run by fewer trucks at higher costs with more demand than at any point in years.

Food is the obvious one. 70.5% of all US food relies on trucks but here’s where it gets broader than anyone’s reporting. Medicine. Insulin. Cancer drugs. Vaccines. Biologics. All temperature controlled freight. This is the fastest growing segment in trucking and the least flexible. Medicine can’t wait for a better diesel price. It can reroute to rail. I mean it can’t. I apologize. It runs on refrigerated trucks and those trucks run on diesel and the cost runs downhill until it hits a patient who never sees the word diesel on any bill they receive.

They just see the deductible going up. Building materials like lumber, steel, drywall, concrete, all flatbed freight, flatbed spot rates have risen 12 of the past 13 weeks. A contractor quoting a kitchen remodel today is quoting at higher freight rates that didn’t exist eight weeks ago. The homeowner paying the quote is subsidizing a diesel spike that they didn’t cause and they don’t know anything about. Agricultural inputs. Think about fertilizer, seed, equipment parts. Diesel hits farming twice. Once on the way in and when the inputs arrive at the field and again on the way out when the harvest leaves that field.

The grocery price increase is that most people are about to feel has two different layers. Two layers. The cost of growing the food went up before the cost of moving it did and that’s not even talking about the fertilizer price spike that we have just recently witnessed because of what’s going on in Iran. See everything in every big box store like electronics, clothing, appliances, furniture, tools, cleaning products. The retail economy is a diesel economy wearing a storefront. Ecommerce. Every Amazon package came from a diesel truck or for at least part of its journey.

Amazon said themselves you know when they announced the 3.5% fulfillment surcharge. Elevated fuel and logistic costs is what they noted. That diesel in a corporate press release. That’s just straight-up diesel and the one that makes the whole thing circular is energy itself. The equipment that drills for oil runs on diesel. Pipeline construction runs on diesel. Refinery maintenance runs on diesel. The fuel industry depends on the fuel it produces to produce the fuel. When diesel rises, the cost of making energy rises. There’s no exit from that loop and an owner operator in West Virginia filled his rig last month, right? Same tank, $700 in January, $1,000 in March.

He gets six miles the gallon. At 564, that’s nearly a dollar per mile just in fuel before he makes a cent. Large fleets hedge their fuel costs. They lock rates in months ahead. 350,000 independent operators, they actually don’t have that option. So you’re gonna see more of these closing their doors in the next three months as fuel stays elevated for longer. See, they eat the cost of this the day that it hits, right? Or they park their rig. Many of them are parking their rigs right now. As a matter of fact, if you’re a trucker, please let me know down in the comments what’s going on on the street, what you’re experiencing.

See, that’s the part that turns the price spike into something structural. Every truck that parks removes capacity from a system that’s already at a multi-year low. Less capacity means more competition for the trucks that are still running. More competition means higher rates. Higher rates mean higher costs pass through to every category that we just walked through. The squeeze feeds itself. Diesel goes up, trucks go down, rates go up, prices go up, and the industry gets thinner, which makes the next spike worse. So here’s what most people haven’t put together yet.

It’s the timing. The diesel price spike happened in March, right? Freight vehicles. Retail supply agreements lock in quarterly. The full price impact of March’s record-breaking diesel spike has not reached the store shelves yet. It’s in transit right now, literally sitting on trucks moving toward the retail system at freight rates that didn’t exist two months ago. Chief economist at Nationwide, her name is Kathy Bodogentik, if I say it right, said that CPI inflation could hit 4.4% in coming months. Up from 2.4% in February. That’s not speculation, that’s what might happen.

And think about what will happen to the stock market if inflation numbers read that much, because all of a sudden the fear will strike investors and they’ll say the Fed has to raise rates. Remember, your April grocery bill doesn’t fully reflect March’s diesel. May’s will. June’s will go further. The medication refill in May, the contractor quote you’re waiting on, the hardware store run, the delivery fee on on the thing that you ordered last night. This is why you need to be in cash and not being in debt right now, because this is going to turn the entire market.

Sentiment is going to go negative really fast. The Washington Trucking Association said it really plainly, when diesel costs stay high, it impacts everything from the cost of goods to the stability of small businesses across the country. Paul was a ditec from Webbush security said it even easier or planer. Diesel is what moves the real economy. If the Iran war keeps it elevated, this becomes a direct hit on consumer prices. The price spike already happened. The industry it hit was already at its weakest point in years. The capacity to absorb it does not exist, and the lag between the spike and your receipt is 30 to 90 days out.

A window that you’re sitting inside of right now. The bill is in transit as far as the higher price bill that you’re about to see. It hasn’t landed yet, but the truck carrying it, it’s already on the road. The question is, are you ready for what’s coming? I hope you got something out of this. If you’re a trucker, please let me know down in the comments below what you think about the current economy, and I want to remind everybody in 2008, the story, big story was in June, that semi trucks were pulling over on the side of the road because they didn’t have the money to deliver their loads, and all of a sudden that’s when the public woke up.

I think you’re about to have a massive day of reckoning this June and July in the markets. With that being said, the economic ninja is out. [tr:trw].

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