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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“The Obama administration is considering tapping the Strategic Petroleum Reserve in response to rapidly rising gasoline prices brought on by turmoil in the Middle East, the White House chief of staff, William M. Daley, said on Sunday.”

While energy prices are excluded from core measures of inflation, fears are rising along with oil prices that the on-going fragile economic recovery could soon be stymied. The administration is understandably trying to proceed cautiously. For example Energy Secretary Steven Chu noted:

“We don’t want to be totally reactive so that when the price goes up, everybody panics, and when it goes back down, everybody goes back to sleep.”

Moreover, as the fighting in Libya grows worse, and the Gaddafi regime digs in its heels, the prospects grow for an extended civil war. Under such a scenario, the strategic oil reserve may prove inadequate for keeping a lid on oil prices. Supplies may not even be disrupted in a significant way, but the fears of larger disruptions could be enough to continue propelling prices higher.

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