The U.S. average diesel price hit a record $5.94 a gallon this week, up 57% from $3.76 six months ago. The higher fuel cost takes three to six months to reach grocery shelves, landing the current spike in the October-through-January price prints.
The national average price for diesel hit a record $5.94 a gallon on Wednesday, beating the mark set just days earlier. That record had itself broken a high last set in June 2022. Diesel now costs 57% more than the $3.76 a gallon it fetched six months ago.
Grocery bills lag the pump by months
The Independent Grocers Alliance, which represents 7,500 supermarkets, says fuel makes up 15% to 30% of the total cost of food — not just shipping it, but growing, processing and storing it. Grocery prices rose just 2.7% in July, and the official food price index fell for the month, but food economist David Ortega of Michigan State University told the Associated Press that freight contracts absorb higher fuel costs first, then reprice every 30 to 60 days before the increase reaches the shelf.
That lag already shows further up the supply chain. The producer-price index stage furthest from the shelf rose 3.2% in May, the sharpest jump since 2009, while the stage closest to consumers rose just 1.1%. Early deliveries have already landed: seafood prices rose 7% and fresh fruit rose 4.9%, categories that lean heavily on refrigerated trucking.
Shippers pass costs to customers
Amazon added a 3.5% fuel surcharge in April, and UPS, FedEx and the U.S. Postal Service followed with their own increases. Airlines are cutting service instead: United Airlines is trimming about 5% of its planned capacity to offset higher fuel costs.
Refiners are earning wider margins on the rally instead. The gap between crude oil input and refined fuel output is running in triple digits per barrel, and Marathon Petroleum, Valero Energy and Phillips 66 have all more than doubled in stock price this year.
Fed weighs the inflation signal
Federal Reserve Governor Christopher Waller said this month that he does not expect energy costs to spread into broader inflation. Friday's August consumer price index reading is expected to show a 0.4% monthly increase in the headline number and a 0.2% rise at the core, which excludes food and energy. Three Fed officials — Beth Hammack, Neel Kashkari and Lorie Logan — already voted to raise rates in July, and Waller has said the August data will decide his own vote.
Source: MarketWatch
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