‘It’s a big hit.’ How high diesel prices can hurt Atlanta’s economy.
Diesel prices surged to an average of $5 a gallon in metro Atlanta on Wednesday, according to AAA, as the ongoing war in the Middle East rattles global markets.
The skyrocketing prices have left local business owner Mayolo Salgado in a quandary.
Fuel is a major expense for his Scottdale-based landscaping company, Eco Gardens. But he already has established contracts with customers, many that run a year, making it difficult to immediately recoup increased operating costs.
“I can’t go back and tell them, ‘Hey, we need more money,’” Salgado said Wednesday.
“So we have to stick and just eat the cost,” he said. “It’s a big hit. We are family-owned. We’re a small company, so every dollar matters to us.”
Since the U.S. and Israel’s war with Iran began, metro Atlanta diesel prices have soared more than $1 per gallon, faster than gasoline prices, according to data from Gas Buddy.
Prices could increase another 20-40 cents in the next several days, Gas Buddy analyst Matt McClain said. That could approach the highest recorded average price for diesel in metro Atlanta of almost $5.56, in June 2022, according to AAA, after Russia’s invasion of Ukraine.
Higher diesel prices can have a sweeping effect on the U.S. economy, including metro Atlanta, a key logistics hub.
Diesel fuel, commonly used by heavy-duty trucks and commercial vehicles, is the primary fuel used in freight. Everything that moves around the country, either by truck or rail, travels by virtue of diesel, said Tom Kloza, chief energy adviser for Gulf Oil.
But the public might not think about that much, he said.
“Rising gas prices are like the great Satan to the teeming millions who get on the road,” Kloza said. “Diesel kind of goes unnoticed, with the exception of the people that are in the business. … But it can have a really damaging impact for inflation in particular.”
More than 70% of Georgia’s communities are completely dependent on trucking for their goods, said Seth Millican, president and CEO of the Georgia Trucking Association.
“Any fluctuation in inputs like fuel prices or insurance costs will have an impact on Georgia’s trucking companies,” he said in a statement. “If the cost for those inputs go up, then those impacts will be distributed throughout the supply chain. If they continue to rise and remain higher, it will ultimately have an impact on costs for consumers.”
U.S. inflation remained steady in February, up 2.4% from the prior year, according to data released Wednesday. But that report considered data that was largely before the war erupted Feb. 28.
Now, rising costs to transport goods could most immediately impact some food prices, McClain said.
“If prices remained this elevated … we will have a problem when it comes to the price points of produce, never-frozen meats, dairy — basically things that require more frequent shipments to local grocery stores,” he said.
Why diesel prices are rising
The conflict in the Middle East has disrupted oil production and shipping because a vital export route, the Strait of Hormuz, has effectively closed amid attacks from Iran.
The U.S. is a top producer of oil and doesn’t rely as much on Middle Eastern production as other countries do. But the war affects crude oil prices, which are ultimately passed down to consumers at the pump.
Conflicting statements by President Donald Trump about how long the conflict will last have caused wild swings in oil prices this week. Global benchmark Brent crude soared to almost $120 a barrel Monday, the highest level since 2022, but have come back down below $100.
“We don’t normally see that kind of a price spread,” McClain said. “That’s a very, very volatile situation whenever you see a price jolting back and forth that much, that fast.”
Kloza, the Gulf Oil analyst, compared the drastic swings to “an entire year of trading.”
Diesel prices have risen faster than gasoline because inventory is tight after severe cold weather this winter. That caused natural gas constraints in the Northeast and drove more use of heating oil, Kloza said.
“We used a lot more diesel this winter than we probably have in any winter since maybe 2018, and the world used more because it was cold in Europe. It was cold in Asia,” he said.
The U.S. Energy Information Administration is predicting Brent crude will remain above $95 per barrel over the next two months, before falling to below $80 a barrel in the third quarter and around $70 by the end of the year, according to an outlook released Tuesday.
Impact on retail prices not yet clear
Elevated oil prices concern retailers, who are watching increased transportation costs and vessel and equipment delays, said Jonathan Gold, vice president of supply chain and customs policy for the National Retail Federation. Ocean carriers are starting to implement some emergency services surcharges, he said, but the effect on retail pricing is not yet clear.
“The longer the conflict continues, the more of an impact the charges and delays will have on supply chains,” Gold said in a statement.
Atlanta-based UPS has raised its fuel surcharge twice this month since the Iran war began, after its prices had remained steady in February.
“UPS updates its fuel surcharge to reflect the changes in the costs we incur for fuel to serve our customers,” a spokesperson said. The surcharge is aligned with the average on-highway diesel fuel price released by the EIA, the company said.
On Tuesday, energy ministers for the G7, a powerful group of major industrialized economies, met to discuss the release of strategic oil reserves. After that meeting, the International Energy Agency said its member countries would release 400 million barrels from emergency reserves, the largest quantity in history, according to The Associated Press.
Also on Tuesday, Iran started placing mines in the Strait of Hormuz, according to media reports. The U.S. Central Command said Tuesday evening, “U.S. forces eliminated multiple Iranian naval vessels,” including 16 minelayers near the strait.
Trump has urged shipping companies to push through the Strait of Hormuz, but Wednesday, three ships reported being attacked while in transit.
McClain said he questions what happens if the war wages on after strategic reserves are released.
“What are you going to do the following time, the following week, if the conflict is still going and the same problem still exists?” McClain asked.
“It’s just going to be a very topsy-turvy week … and exactly how the conflict goes on will very much dictate the price point of oil,” he said. “Unfortunately, right now, we may see prices continue to go up.”
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