Record diesel prices stoke food inflation, transportation costs

Context

The record price of diesel threatens to stoke inflation at a time when consumers are already price-sensitive and businesses are reeling from higher costs due to trade tensions. Why it matters: Diesel is a key cost throughout the supply chain, meaning soaring prices could eventually show up in what consumers pay for everything from groceries to household goods. Driving the news: The national average price of a gallon of diesel topped $6 for the first time ever, AAA said Friday, Axios' Ben Berkowitz reports. That's up 60% from a year earlier. Between the lines: Food prices could be among the first places consumers feel the ripple effects, executives said this week. At grocery chain Kroger, which has been trying to keep a lid on prices: "I would expect that the pressure is actually going to mount," CEO Greg Foran said Friday on an earnings call. At pork producer Smithfield Foods: "That impact is beginning to flow through in the second half of the year," CFO Mark Hall said Thursday. At Hormel Foods: "With the Iran war and the spike in diesel costs, that's been something we've had to confront," interim CEO Jeffrey Ettinger said Wednesday. But the effects extend well beyond food. For example, at Newell Brands — whose portfolio includes Rubbermaid, Sharpie and Coleman — the inflationary impacts of energy costs have far exceeded the company's initial estimates. "It's either resin, which is obviously dependent on the price of oil, or it is direct transportation costs, i.e., diesel," CFO Mark Erceg said Tuesday. The big picture: Energy prices have spiked since President Trump launched the war with Iran, which prompted the closure of the Strait of Hormuz, a key shipping lane. The latest Energy Information Administration outlook expects retail diesel to average $4.40 a gallon in 2027, up 33 cents, or 8.2%, from its previous forecast of $4.07, Axios' Rebecca Falconer and Ben Geman reported. The average price of unleaded gasoline has also spiked, rising by $1.11 over the last year to $4.30 per gallon as of Friday, according to AAA. By the numbers: 47 of the 50 states have experienced an increase in average diesel prices of more than $2 per gallon over the last year, according to GasBuddy analyst Patrick De Haan. The economy is facing an extra $300 million in diesel costs every 24 hours. California is poised to become the first state with average diesel prices above $8 — with many stations already above $9, according to GasBuddy. The bottom line: Record diesel prices are turning the energy shock into a broader cost shock for businesses and consumers.

What it means

Causal chain

No clear market signal

Not investment advice · for informational purposes only. Generated 11 Sept, 21:13 UTC