Trucking can’t catch a break. Just as industry sentiment was beginning to improve — new truck orders ticking upward, spot market rates showing resilience, and supply and demand finally drifting back toward balance — the industry was dealt another blow.

And it comes as an outcome of something entirely outside of the trucking industry’s control. A distant war in Iran has choked off traffic through the Strait of Hormuz, the narrow shipping corridor through which roughly 20 million barrels of oil flow each day. Energy markets reacted immediately.

Oil prices, as of this writing, have already surged above $100 a barrel. Diesel prices in Atlantic Canada spiked 14.9 cents per liter overnight, doubling an increase already seen earlier in the week.

Fleets and owner-operators in B.C. are paying as much as $2.26 per liter as a result of the conflict in the Middle East. To put that in perspective, a 10-15 cent increase adds about $1,000 to $1,500 per truck each month, depending on mileage.

For a typical longhaul truck running about 190,000 kilometers a year, a 10-cent increase in diesel prices can add roughly $7,000 to annual operating costs per truck, a stark reminder of how quickly geopolitical shocks can ripple through the trucking industry.

Fuel surcharges offer some protection, but lag price increases at the pump. Any sustained increase in the price of diesel will spell the end to many operators who have clung on resiliently through a three-year trucking recession.

Unique exposure

The trucking industry is uniquely exposed to those shocks. While other sectors can hedge energy costs or shift production, trucking runs almost entirely on diesel and consumes vast amounts of it every day. For many fleets, fuel is second only to labor as the largest operating expense. When diesel jumps suddenly, margins evaporate just as quickly.

Under normal economic conditions, rising fuel costs might be manageable. Freight rates would adjust, and fuel surcharges would eventually catch up. But this price spike is arriving at a fragile moment for the industry.

Many fleets are only now beginning to emerge from one of the longest freight downturns in recent memory. Capacity has already been leaving the market as many carriers simply couldn’t survive the prolonged slump. Now this.

Higher diesel prices don’t stop at the carrier’s balance sheet. Every increase eventually flows through the supply chain. The cost of moving groceries, construction materials, manufactured goods and consumer products all rises with the cost of fuel. In that sense, diesel prices are often one of the earliest warning signs of broader inflationary pressure building in the economy.

What comes next?

How long will the pain at the pump last? It’s impossible to tell. How long will the war itself last? How long will it take to secure safe passage for oil tankers through the Strait of Hormuz? How effective will tapping into strategic reserves be in limiting the surge on fuel prices?

For this, we look to the U.S. Department of Energy’s Energy Information Administration (EIA) for guidance. In its latest energy outlook, released March 10, it predicted U.S. diesel prices will average $4.12 a gallon (about $1.47 a liter in Canadian dollars), marking a 20% increased projection from its previous report just one month earlier.

The retail average will be $4.54 in the second quarter, before falling to $4.12 in the third quarter and $3.92 in the fourth quarter. In 2027, the average is projected to be $3.78 a gallon, up from $3.47 in EIA’s outlook a month ago. 

“We make the assumption in our modeling that the effective closure of the Strait of Hormuz will cause oil production in the Middle East to fall further in the coming weeks. We assume this shut-in production will gradually ease as transit through the Strait resumes,” EIA said March 10. 

So, while there is some relief on the horizon, diesel prices are likely to remain higher for the foreseeable future. A painful reminder that for an industry that runs on diesel, the ripple effects of distant conflicts can arrive faster than any load — and they show up first at the pump.