Transportation companies across the United States are raising alarms as diesel prices soar. Diesel hit a record $6.31 per gallon on Wednesday, a surge linked to supply chain disruptions, which has industry leaders increasingly worried about the impact on profits.
Brad Delco, finance chief at trucking giant J. B. Hunt, expressed concerns at a Morgan Stanley industry conference. He noted the company could see a 5% to 10% earnings drop from the second to the third quarter due to rising costs. The market reacted sharply. J. B. Hunt's shares tumbled over 13% on Wednesday, marking one of its worst trading days since going public in 1983. The broader Dow Jones Transportation Average also fell more than 2% during midday trading, with J. B. Hunt leading the decline.
Patrick De Haan, head of petroleum analysis at GasBuddy, cautioned that prices might climb higher. He forecasted the national diesel average could exceed $6.50 soon. In the Midwest, states like Michigan, Ohio, and Illinois might see prices hit $7 per gallon. Diesel prices have jumped nearly 20% in the past month.
At the same conference, Claude Elkins, chief commercial officer of Norfolk Southern, described the situation as surreal. In some regions, diesel prices have already reached $8 per gallon, he remarked. Elkins emphasized the need for vigilance, warning these price levels could have lasting economic impacts. The transportation sector is a crucial component of the U. S. economy, contributing significantly to the nation's GDP, according to the Bureau of Transportation Statistics.
Despite these challenges, retail sales rose 1.2% from July to August, even as energy-related inflationary pressures persisted. Excluding autos and gas stations, sales saw their highest growth in over a year. However, the record diesel prices coincide with the fall harvest season, potentially raising costs for producers of crops like corn and wheat. Economists warn these increased input costs could eventually lead to higher prices for consumers at grocery stores and restaurants.
Yet, the head of consumer and retail research at Melius Research suggests that inflationary pressures from fuel costs will initially be absorbed by farmers, transporters, and retailers before reaching consumers. Meanwhile, George Gianarikas, an analyst at Canaccord Genuity, indicated that the rising fuel prices might boost demand for autonomous trucking and electric freight solutions within the transportation sector.
