Diesel prices have become a major point of focus for the transportation industry as crude oil markets continue to react to disruptions surrounding the war in Iran and the resulting uncertainty around crude oil supply through the Strait of Hormuz.
The situation remains fluid, and conditions can change quickly. As a result, monitoring crude oil and diesel prices closely is increasingly important for carriers, shippers, and anyone managing transportation costs.
Crude Oil Prices Have Fallen Significantly
Crude oil has fallen significantly from its recent peak, declining from approximately $112 per barrel in early April to roughly $93 per barrel.
That represents:
- Crude Oil: $112 → $93 per barrel
- Dollar Decrease: $19 per barrel
- Percentage Decrease: 16.96%
While diesel does not move one-for-one with crude oil, crude oil remains its largest input cost. Retail diesel prices also typically lag changes in crude oil by one to three weeks as refiners and fuel distributors work through existing inventory.
If the decline in crude oil continues to hold, diesel prices are expected to continue easing into early July.
What Lower Diesel Prices Mean for Carriers
To understand the potential impact, consider a typical over-the-road truck:
- Average fuel economy: 6.8 MPG
- Fuel tank capacity: 250–300 gallons
- Weekly mileage: 2,500–3,000 miles
- Weekly fuel consumption: Approximately 370–440 gallons
Every $0.10-per-gallon change in diesel represents approximately:
- $37–$44 in weekly fuel savings per truck
- $150–$175 in monthly savings per truck
If diesel falls another $0.50 per gallon, a single truck could save approximately:
- $185–$220 per week
- $750–$900 per month
For a fleet operating 50 trucks, that could represent nearly $40,000–$45,000 in monthly operating savings.
These figures are an example rather than a fixed calculation. Actual fuel costs will vary based on mileage, fuel economy, fuel prices, routes, and other operating factors. However, the example demonstrates how even relatively small changes in diesel prices can have a meaningful impact on carrier operating costs.
Why Freight Rates Aren’t Necessarily Falling With Diesel
One of the more interesting dynamics in today’s freight market is the relationship between fuel prices and transportation rates. The assumption is straightforward: if diesel prices fall, freight rates should fall as well. But that’s not necessarily what is happening. Truckload spot rates have remained elevated because linehaul pricing is increasing faster than fuel surcharges are declining.
In other words:
- Fuel costs are decreasing.
- Fuel surcharges are decreasing.
- Linehaul rates are increasing.
This tells us that the freight market is becoming less dependent on fuel costs as a primary pricing driver and increasingly influenced by truck availability and capacity.
When capacity tightens, higher linehaul rates can offset the savings created by lower fuel prices.
Understanding Fuel Surcharges
For contracted transportation accounts, fuel surcharge (FSC) tables are an important part of how transportation costs are calculated.
Source: Sonar, DOE Diesel Price Per Gallon charted from EIA.
The chart shows the fluctuation in diesel prices over the past six months and highlights how quickly fuel costs can change.
The underlying data comes from the U.S. Energy Information Administration (EIA), which reports national gasoline and diesel prices.
Source: U.S. Energy Information Administration (EIA)
The U.S. National Average Diesel Price is commonly used as a reference point for calculating fuel surcharge adjustments on contracted transportation.
Fuel surcharge tables allow transportation contracts to adjust with changes in diesel prices without requiring the entire transportation agreement to be renegotiated every time fuel prices move.
The basic structure is:
Linehaul + Fuel Surcharge = All-In Rate
This distinction is important when evaluating freight rates. A change in the fuel surcharge does not necessarily mean the underlying linehaul rate has changed.
Fuel vs. Capacity: An Important Freight Market Distinction
The current market demonstrates why it’s important to look beyond diesel prices when evaluating transportation costs.
Lower fuel prices can reduce a carrier’s operating expenses, but that does not automatically translate into lower freight rates. If truck availability is tightening and carriers are commanding higher linehaul rates, those market conditions can have a larger impact on the final transportation cost than fuel alone.
For shippers, this means watching diesel prices in isolation can provide an incomplete picture of the freight market. For carriers, lower fuel costs can provide meaningful operating relief even when linehaul rates remain firm.
Ultimately, the relationship between fuel, fuel surcharges, linehaul rates, and capacity is what determines the all-in cost of transportation. As the market continues to evolve, keeping an eye on both diesel prices and capacity trends will be critical to understanding where freight rates are headed next.
What to Watch
The diesel market remains highly fluid, particularly as global crude oil supply and geopolitical conditions continue to develop.
For the transportation industry, the key indicators to watch are:
- Crude oil prices
- U.S. national average diesel prices
- Fuel surcharge adjustments
- Truckload rejection rates
- Carrier capacity
- Linehaul spot rates
Together, these indicators provide a much clearer picture of the freight market than any single metric can provide.
Diesel prices may be moving lower, but that does not necessarily mean transportation rates will follow. The balance between fuel costs and available capacity will ultimately determine where freight pricing goes next.
Learn more about how Integrity Express Logistics can help you navigate these roads.
Author
Brian Seven – Sales Engagement Manager