Diesel Just Broke Every Record

An owner-operator pulled into a truck stop in Fairview, Tennessee this week. He filled his rig. The pump stopped at more than $1,200. He stood there and stared.

That was not gas. That was diesel. And diesel hit an all-time high on Wednesday. $6.31 a gallon. The old record from June 2022 is gone.

Here's what worries me. Regular gas is nowhere near its own high. So most people don't feel this yet. But diesel moves everything we buy. Your food. Your kid's school bus. The Amazon box on the porch. The tractor that grew the wheat in your bread.

I don't think most people realize how strange this split is. Gas and diesel usually move together. Not this time. They are pulling apart. And the wrong one is winning.

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Think about what runs on this stuff. Almost every big truck on the highway. Two out of three tractors on a farm. Almost every train hauling freight across the country. The ships at the port. The backhoe at the job site down the street. People in the trade call diesel the most universal input in the economy. That is a fancy way of saying the country does not move without it.

The reason for the jump is simple. Russian refineries have been hit. Ukraine keeps targeting them. The Strait of Hormuz is a mess. US refineries are already running flat out. They have nothing left to give. Diesel supply is thin. Really thin.

I've been watching this all week. Every day the number gets worse.

I get it. Prices rise. Prices fall. We've seen this movie. But this one plays out different. Big trucking companies locked in fuel deals months ago. They have hedges. They have fuel desks and buying power. They pass surcharges to their customers. Their margins are growing right now, not shrinking.

The small guy has none of that. The driver in Fairview owns one truck. Maybe two. No hedge. No fuel desk. No leverage. Just a bill and a customer in Nashville who does not want to pay a surcharge. He is deciding today if he eats the cost or loses the account. Either way, he loses.

Nobody knows how long this lasts. That is the honest answer. But the numbers we have are ugly. Brown University tracks this in real time. Diesel has added $46.7 billion to US fuel spending since the Iran war began. That is $357 per household. In a few months. And it is still climbing.

Here's the next shoe. Home heating oil is basically diesel with a different name. Forecasts say it goes up more than 30% this winter. The Northeast runs on the stuff. Boston. Maine. Upstate New York. Small towns where the tank in the basement gets filled every few weeks. That bill lands in six weeks. Right when the cold hits.

The Fed raised rates yesterday. Every headline blamed inflation. Nobody said the word diesel. But it is a huge part of the story. When trucks cost more to run, everything on the shelf costs more. When farmers pay more to run their combines, food costs more. When rail lines pay more, everything they haul costs more. It ripples out. It always does.

The trucking companies won't tell you how much freight they turned away this month. The farm co-ops won't tell you what they paid to fill the tank at harvest. The town treasurer won't tell you what heating the school will cost until the invoice comes in. These numbers show up late. By the time we see them, the damage is done.

Nobody is telling readers about this. They keep pointing at the gas pump. The gas pump is the wrong pump. The one that matters sits behind the fence at a truck stop off I-40. The one that driver in Fairview uses.

I keep coming back to him. One man at a pump in Tennessee. Doing math in his head at 6 in the morning. His wife on the phone. His kid needs braces. The truck payment is due Friday. The customer in Nashville will not pay a surcharge. The customer in Memphis might, but only if he asks the right way. He has to decide by tomorrow.

Multiply him by 350,000 owner-operators. That is who moves our stuff. That is who is about to break. Some will park the truck. Some will sell it and take a warehouse job. The freight will still move. It will move through the big carriers. And the big carriers will charge us more. We will pay it. There won't be anyone else.

I can't stop thinking about this. Not the number. The man. The way he will drive home tonight and try to figure out how to say it to his wife. He did nothing wrong. He just picked the wrong week to own one truck instead of a thousand.

More on this tomorrow.

— American Ledger