Record diesel prices are creating new challenges for agriculture and transportation alike. Matt Wells, vice president of the Mid-West Truckers Association, says several factors came together at once to tighten fuel supplies and push diesel prices higher.
“You tie in everyone’s reserves getting bled down. We had some major refinery changes in the United States. Two major refineries were shut down in California. A major refinery in Joliet was shut down for over seven to ten days. And then throw in the fact that Ukraine and Russia, as war has extended into the Russian territory, and Ukraine was very successful in destroying or damaging a number of Russian refineries, has really put a constraint towards the middle and end of September on fuel supplies in the world. So we’ve seen these fuel prices jump up very quickly, and the industry has been grappling with them the best we can.”
He says higher fuel costs will eventually work their way through the supply chain.
“Eventually what’s going to happen is it’s going to trickle down to the consumer and the final bill payer. In the ag world, that’s going to be the farmer, and it’s going to be a painful situation when you raise a fundamental price like this. I don’t think we’re going to see fuel prices drop any, very rapidly anytime soon, just because that refining and reserve capacity has to be built back up even after refineries come back online and are able to do some things.”
And while some hope prices will retreat quickly, Wells says the industry should prepare for elevated fuel costs well into the future.
“It’s a difficult time, and there’s no easy answer here, other than, you know, rates are going to have to change and fundamental costs are going to have to be factored into everybody’s playbook or business plan within and over the next year, year and a half, until things normalize. But as we’ve always seen with any fuel price surge, no matter how high or how long it has went, and obviously this is the highest and might be one of the longest increases, it never really ever quite gets back down to the price it was before.”
He says President Trump’s declaration for the use of red-dye diesel on roadways sparked some misconceptions about how that fuel differs from conventional diesel.
“It’s different. And it is not different. A few years ago, it may have been had more sulfur in it. But today, red dyed diesel is the same as clear diesel that people put in their pickup trucks or semis, just when it leaves the racks. And the racks is where the refinery loads up semitrailers. When it leaves the rack, if it is to be off-road diesel, they literally just put dye in it. With the increased fuel prices, some states started allowing their farmers to utilize red dyed diesel on the road. And the reason why is because you don’t have to pay the motor fuel tax on it. So it would relieve them of having to pay taxes.”