Higher diesel fuel prices increase transportation costs for goods that rely on trucking. However, trucking company stocks have not shown a consistent negative relationship with rising diesel fuel prices in recent years. The next two monthly charts include overlays of red boxes during periods of elevated diesel prices. Note that these periods include strong stock prices for Old Dominion Freight Lines (ODFL) and XPO, Inc (XPO). ODFL is a U.S.-based less-than-truckload (LTL) transportation company that provides regional, inter-regional, and national freight shipping services through an integrated network of service centers. XPO is a U.S.-based transportation company specializing in less-than-truckload (LTL) freight services, operating a large network of terminals that move palletized shipments across regional and national supply chains.

According to FreightWaves, while diesel is roughly 20-25% of the cost of trucking, fuel costs are typically passed through to the shipper. Thus, trucking companies can manage around higher fuel prices unless trucking customers experience demand destruction from the higher prices. FreightWaves notes that “for shippers, rapid increases in fuel prices can wreak havoc on budgets”.

Because goods markets have already adjusted to significant tariff-related cost pressures, suppliers may attempt to delay passing new fuel surcharges through to final consumers. Unfortunately, recent indicators, like the emergency release of oil from the strategic reserves of the International Energy Agency (IEA) and the U.S. suggest that countries are bracing for an extended oil shock. From CNBC:

“The International Energy Agency said on Wednesday that its 32 member countries would release 400 million barrels of crude from strategic reserves, the biggest coordinated drawdown since the agency was created in 1974 after an oil crisis the year before. The U.S. separately said it would tap 172 million barrels from its Strategic Petroleum Reserve as part of the coordinated effort.”

Given oil prices failed to respond to this announcement, analysts quoted in the CNBC article warned that markets are bracing for a protracted war along with the need for countries to refill the petroleum reserves at some point in the future. Shipping has essentially ground to a halt through the Straight of Hormuz. The resulting 15 million barrels per day lost in crude and refined products will push strategic reserves to their limits.

Even after the current oil shock subsides, diesel prices may stabilize near recent levels rather than returning to the much lower ranges seen before 2021. The chart above of diesel prices shows that the lows that held through much of 2025 were far above the lows from 2009 to 2020. Thus, normalization will be a relief, but the price of diesel will remain elevated and create a floor for the input prices of many goods.

Be careful out there!

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Note that this compares to a UPS rate hike of 4.9% for ground shipping, and recent moves by the U.S. Postal Service to hike shipping rates to stave off bankruptcy.

The post FedEx Increasing Ground Rates, Reducing Fuel Surcharge appeared first on Inflation Watch.

For more details see AP story: “Postal prices going up for express, priority mail.”

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• Nike Chief Executive Mark Parker said yesterday that  “rising freight, labor and oil costs are likely to add pressure to future results.”
• Levi Strauss & Co. said earlier this week that it is raising prices on some products to cover rising costs “for raw materials such as cotton as well as for labour and freight.”
• Across the pond, Associated British Foods said earlier this month that “high cotton prices and freight costs will put pressure on profit margins next year.”
• Back in the U.S., ethanol producers are warning of higher shipping costs too: “Going forward, exports will be affected by an increase in shipping rates[.]  Container rates are expected to increase Oct. 1 by $300-400 per container. Rail rates will take an annual new crop increase, and physical rail cars themselves are tight and expensive.”

(Emphasis added.)

I’ll leave it to Inflation Watch readers to decide whether Congress should regulate railroad freight prices, as Sen. Rockefeller proposes.

The post Freight prices rising; Sen. Rockefeller says Congress must intervene appeared first on Inflation Watch.

“Faced with plummeting mail volume traced to the recession and increased use of the Internet, the Postal Service is projecting a deficit of nearly $7 billion for the next fiscal year. Despite eliminating millions of work hours and reducing expenses by more than $1 billion every year since 2001, a budget gap remains….
….’There is no one single solution to the dire financial situation that the Postal Service faces…These proposed rate adjustments are moderate and part of a fair and balanced approach to insuring mail service for all Americans well into the future.'”

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FedEx says it will raise prices at its freight and national trucking unit by 5.9 percent on Feb. 1.

These rate increases apply to the company’s less-than-truckload shipments, where a number of smaller loads from a variety of shippers are consolidated on a single truck for final delivery.

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FedEx Corp. said Thursday it will raise shipping rates for its Ground and Home Delivery units by an average of 4.9 percent in 2010 — 1 percentage point less than this year’s rate hike.

FedEx announced in September it will increase shipping rates for Express packages shipped within or from the U.S. by an average of 5.9 percent in 2010, also 1 percentage point lower than FedEx’s rate increase this year. That rate is partially offset by a lower fuel surcharge.

UPS also is hiking 2010 ground rates.

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Hawaii consumers, already struggling in a tough economic environment, could see higher prices for groceries and other commodities next year.  Matson Navigation Co., the state’s largest ocean shipper, said yesterday it is raising rates for Hawaii service an average of 3.8 percent, with rates increasing $120 per westbound container and $60 per eastbound container, which traditionally has lower volume. In addition, Matson is raising its terminal handling charge by $125 per westbound container and $60 per eastbound container.

The post Matson Navigation Co. raises shipping prices to and from Hawaii appeared first on Inflation Watch.

“UPS (NYSE:UPS) today released new list rates for 2010, including an average increase of 4.9 percent for UPS Ground packages and an average net increase of 4.9 percent on all air express and U.S. origin international shipments.

The rate increase for air express and international shipments is based on a 6.9 percent increase in the base rate, less a 2 percent reduction in the air and international fuel surcharge index.

…The new rates take effect on Jan. 4, 2010.”

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