Trucking and heating costs to rise as diesel fuel hits a seven-year high

Trucking goods across the U.S. is getting more costly as retail diesel prices rise to a seven-year high.

Retail diesel prices rose to $3.653 per gallon Thursday, the highest since October 2014, according to auto club AAA. The latest surge can be tied to arctic weather in the Northeast that boosted use of diesel for heating at a time when demand is already high for the road fuel.

The timing is less than ideal for the Biden administration as it tries to reign in inflation. High diesel prices contribute to the cost of trucking, home heating and farming. Consumer prices rose last year by the most in nearly four decades last year.

It may take time before prices ease. U.S. distillate inventories, a category that includes both diesel and heating oil, are at the lowest level seasonally in eight years as of last week, according to Energy Information Administration data. At the same time, implied demand for the fuel on a four-week rolling basis rose to 4.02 million barrels per day last week, the highest for this time of year since 2009.

Oil refiners, already constrained by a heavy maintenance season, are unlikely to channel more crude into distillate production as they prioritize building up gasoline stockpiles ahead of the summer surge, said David Tonyan, an analyst from Energy Aspects.

The bulk of the fuel is burned on the highway, and trucking demand is here to stay even as the weather warms. Trucking tonnage rose marginally in 2021 compared with 2020, according to data from the American Trucking Association, which calculates an index based on surveys from its members.

In a month, farmers will be looking to stock up on fuel to power machinery used for spring planting.

Futures prices, which usually lead retail prices by a few weeks, showed signs of a break in the recent diesel rally Thursday, but is still trading near a seven-year high.