High diesel costs force companies to raise prices
Gasoline gets the most attention when fuel prices rise, despite the fact that almost everything in the typical American household got there with the help of diesel.
Both types of fuel reached record prices this month. But the wider impact could be felt with diesel, which powers everything from farm equipment that helps produce the food in our refrigerators, to tractor-trailers that haul most of the produce sold in stores, to trains and vessels carrying certain goods. , construction equipment used to build houses and other structures.
“Fundamentally what comes down to diesel is how the economy is moving,” said Denton Cinquegrana, chief oil analyst at the Rockville, Maryland-based Oil Price Information Service.
Many companies that pay rising diesel costs to manufacture and deliver products will recoup at least some of their expenses by raising prices for customers.
Long Island diesel-dependent businesses are feeling the pinch in fuel prices reaching highs this month not seen in nearly 14 years.
Diesel power touches nearly everything at Sujecki Farms & Nurseries, which has 175 acres of farmland across six sites from Calverton to Jamesport, said Jon Sujecki, a fifth-generation farmer who co-owns the business with his wife, Kristy.
The price has doubled for the diesel needed for the farms’ 12 tractors, and the cost it pays trucking companies to haul freight has risen 30% from a year ago, said Sujecki, whose farms grow fruits, vegetables and California privet, a shrub used as hedges in yards.
The cost of fertilizer for farms, which is a petroleum-based product, nearly doubled last year, from $500 a ton to $950 a ton, he said.
Additionally, diesel is used to run Sujecki Farms’ irrigation systems, and that process will begin in May and end in October, he said.
Farm costs have “exploded. … I feel like there’s no stopping this right now,” said Sujecki, 36.
Most of his clients are agricultural brokers, who sell to restaurants and grocery stores, and nursery brokers, who sell plants to garden centers, he said.
It has raised farm prices by 7% over the past year, largely due to the rising cost of diesel, and some of those costs are passed on to retail customers, he said.
Trucks do the heavy lifting
The average diesel price hit multi-day record highs in March, with the national price peaking at $5.14 a gallon on March 12 and the Long Island price hitting $5.36 a gallon on March 13, according to AAA .
Uncertainty amid Russia’s Feb. 24 invasion of Ukraine and low diesel inventories around the world pushed prices this month to highs not seen since 2008, Cinquegrana said.
Meanwhile, trucks still make up the bulk of the nation’s freight transportation, 73%, but in New York State the rate is 94%, said Kendra Hems, president of the Trucking Association of New York. , a commercial group based in Clifton.
For trucking companies, fuel costs are typically the second highest cost, after labor, Hems said, but these days fuel is the highest cost for some.
She said the hardest hit businesses right now are small ones with 20 or fewer trucks; these small companies represent 90% of trucking companies in the country.
“Smaller carriers don’t always have the luxury of forgoing contracts” for less profitable deals with potential customers as supply chain challenges and consumer demand persist, she said. “And if these companies can’t weather the storm, we’re going to have more disruptions in the future.”
Shea Trucking in West Babylon is hired by companies to move various types of cargo, including steel, granite, furniture and cosmetics, between ports and warehouses in New Jersey and New York and other destinations, said Jim Shea, President. The company also transports goods from airports, said Shea, who said the company has 14 straight trucks, 12 tractors and 28 trailers.
“As far as fuel goes, it’s going up and I have no choice but to pass the cost on to my customers,” Shea said.
About three weeks ago, Shea Trucking increased its fuel surcharge, the fee customers pay based on the weight of goods carried, from 25% to 35%, the highest since the company was founded 50 years ago. years, he said.
Trucking remains the most efficient method of transporting goods due to the element of time, said Avery Vise, vice president of trucking at FTR Transportation Intelligence, a market analysis firm based in Bloomington, Indiana. .
“It’s probably not as cost efficient as rail, but there’s a balance with shippers,” especially during the COVID-19 pandemic when consumer demand is high and inventory is tight. stressed, he said.
“You can’t reduce”
Bill Gellert co-owns 54 restaurant franchises in 10 states, including the nine Five Guys restaurants in Suffolk County, under Gellfam Management Corp. in upstate Hillsdale.
Fuel surcharges charged by food distributors to deliver product via tractor-trailer to restaurants have doubled in recent months, said Gellert, who said inflation linked to rising product costs and worker wages employees was already putting pressure on the company.
“You can’t cut staff, because if you cut staff, you cut service. And if you reduce the service, who will want to come to us? He asked.
Rising fuel prices increased overall Long Island restaurant costs by nearly one percentage point, Gellert said.
“On Long Island, that would be more than $10,000 a month” increase over last year, he said.
Thus, the company has invested more money to implement technology to operate more efficiently, including scheduling employees more appropriately, based on customer demand, he said.
One of Sujecki Farms’ customers is grocer Stew Leonard’s, a chain of seven supermarkets based in Norwalk, Connecticut, including two on Long Island.
Stew Leonard’s fuel costs for its stationary refrigerated trailers and a dozen tractor-trailers that ship product between its stores and distribution centers rose more than 28% in 2021 compared to 2020, the carrier said. Meghan Bell lyrics.
“If fuel prices continue to increase at their current rate, we expect to see in 2022 an increase of more than 56% in fuel costs compared to 2021,” she said.
The grocer has tried to somewhat offset its rising fuel, food and employee salary costs by raising its in-store grocery prices by about 3.5% year-to-date, said Stew Leonard Jr., president of the grocery chain.
“So our family kind of dragged their feet on that. So we don’t want to start elevating everything…we’re caught between a rock and a hard place right now,” he said.
Diesel prices hit record highs this month. Here’s how the numbers stack up nationally and on Long Island.
Average US diesel price per gallon
Previous high before this month: $4.84 on July 17, 2008
Current high: $5.14 on March 12
Price Friday: $5.08
Price one year ago: $3.10
Average Diesel Price Per Gallon on Long Island
Previous high before this month: $5.15 on June 14, 2008
Current high: $5.36 on March 13
Price Friday: $5.31
Price a year earlier: $3.17