Record-High Diesel Prices Squeeze Wisconsin Trucking Companies

Trucks.

Record-high diesel fuel prices in Wisconsin are starting to come down from their peak in mid-May, but the transportation industry in the state is still feeling the squeeze.

Wisconsin Motor Carriers Association President Dan Johnson told WPR’s “Wisconsin Today” that diesel accounts for roughly 20 percent to 30 percent costs for trucking companies.

“I don’t know that ‘panic’ would be the right word, but they’re definitely concerned about this,” Johnson said. “We’ve been through this before — about five years ago — when diesel prices spiked near to where they are today, so it’s not our first time through this. But we would definitely like to see some relief sooner rather than later.”

Diesel prices last skyrocketed in 2022 when Russia attacked Ukraine. Now, the U.S. war with Iran has had an even greater impact on diesel, with the global supply limited by the closing of the Strait of Hormuz.

According to GasBuddy petroleum analyst Patrick De Haan, the average diesel price in Wisconsin peaked at $5.88 a gallon on May 13. After Memorial Day, it came down to an average of $5.68 as the oil market projected optimism for U.S. negotiations with Iran.

Diesel prices in the state were below $5 a gallon last month and below $3.50 a year ago, according to AAA fuel price data.

Johnson said larger trucking companies are better able to withstand these higher prices than smaller firms because they can negotiate fuel purchasing programs and other fixed costs.

“If you have three or maybe five trucks, you may not be considered in that same universe for a fleet that could benefit from a fuel surcharge or some sort of negotiated contract,” Johnson said. “So an owner-operator with one truck, he or she is probably going to be paying close to retail price for diesel.”

When trucking companies pay more to fuel their semis, they end up passing those costs on to their customers.

It can have a trickle down effect that makes its way to the average person who purchases goods from a store.

“The shippers pay a little bit more with the fuel surcharges, and that is going to be passed along to the consumers,” Johnson said. “There may be delays in getting items shipped to them, as they try to maybe put a pause on their shipping operations and wait things out, or just a straight price increase to the consumer.”

High diesel prices are just the latest in a recent tough stretch for the transportation industry.

Trucking companies are still bouncing back from what Johnson called a “freight recession” when demand dropped as the COVID-19 pandemic subsided.

Labor and insurance costs have also risen, and if diesel prices remain high for the foreseeable future, it could be too much for some smaller companies to survive, Johnson said.

“It’s definitely going to affect them if they are paying that higher rate, and they’re not able to negotiate something, so it could definitely have a serious impact on their operations,” Johnson said. “This might be the straw that breaks the camel’s back for some of them. That’s very possible.”

Record-high diesel prices squeeze Wisconsin trucking companies was originally published by Wisconsin Public Radio.