What is Driving the Rising Fuel Prices?
Undoubtedly, you’ve heard numerous stories recently about the rising cost of fuel in the U.S. As of March 9th, 2022, the average cost per gallon of gas was $4.30. In some areas of California, there are reports of prices nearing the $8.00 per gallon mark.
This average cost of gasoline has surpassed the previous high of $4.10 per gallon of 14 years ago.
While costs of gas for the average consumer are important to consider, it’s also crucial that we recognize the impact the rising cost of diesel is having on truck drivers. This week, the price per gallon of diesel fuel rose to $5.00 per gallon. This is the highest average price that diesel has ever reached.
What is driving this massive increase in the cost of fuel? What are the likely effects of the rising fuel prices and how will it continue to affect the trucking industry?
Let’s take a look.
What Caused The Increase In Fuel Prices Across the Board?
The Waning Pandemic
When COVID-19 struck, the demand for fuel dipped drastically. This was largely thanks to the fact that a large portion of the U.S. workforce was now working from home or otherwise quarantined. In fact, in America alone during the beginning of the pandemic, drivers decreased their mileage by almost 50%. As demand decreased, so too did the prices at the pump.
Of course, the market was due for a correction. As the national workforce started returning to work and daily life in general, it did so almost all at once. This created an imbalance in supply and demand and before long the gas prices began to not only stabilize but rise.
The Russian Invasion of Ukraine
When Russia invaded Ukraine, world leaders made the decision to impose strict sanctions on Russia. One such sanction is the complete ban of Russian oil and gas to the United States.
The ramifications of banning oil and gas from one of the world’s largest producers are widespread. But suffice it to say that by sanctioning Russia in such a way, global fuel prices responded by spiking to levels the nation has never seen. This is expected to be a hurdle the American people and industries will shoulder throughout the rest of 2022.
For a while now, inflation has been on the rise.
This has affected nearly every industry, as prices for raw materials and finished products have been steadily climbing. The inflation we are now seeing has led to extremely strained finances across many U.S. households. Combine this with rising gas prices and many are left wondering how they are going to be able to keep their tanks full.
Unfortunately, some experts worry that as people begin to anticipate inflated prices and react accordingly, the problem will only become worse, as part of a positive feedback loop. This means that the panic of increasing prices at the pump will only serve to drive those prices that much higher.
How Are Truck Drivers Dealing With Rising Diesel Prices?
Unfortunately, trucking companies don’t have much of an option but to pay the prices they are seeing at the pump. After all, materials and goods need to be able to be delivered if our economy is to continue functioning at all.
In order to try to overcome the increased price, some trucking companies have decided to raise freight charges and pass the cost onto their customers. This is a tough balancing act to achieve, however, as these trucking companies must remain vigilant as the market becomes even more competitive.
With a truck driver shortage, crippling inflation, and diesel prices approaching an all-time high, trucking companies have quite a tricky situation at hand to navigate.
Some drivers have raised their rates in an effort to offset the higher fuel prices, while others aren’t willing to risk losing their customers and are attempting to make up the extra cost elsewhere. Another number of trucking companies are just trying to operate on thinner margins as they wait out this tumultuous time.
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