In late summer, when almond husks split open, workers at Creekside Farming in Madera gear up machinery to shake the trees. Tractors zoom around, fallen nuts are collected, and trucks cart off the bins of almonds. The whole process relies on diesel fuel, which has grown extremely expensive in recent months, said farm owner Jay Mahil, whose family has been growing wine grapes, citrus and other crops in the Central Valley for four generations.
The national average price of diesel hit a new record high of $5.85 per gallon Friday, while California’s average climbed to about $7.71, according to AAA motor club. The oil product undergirds much of the global economy, and California, a major player, is no exception to the pain caused by ongoing supply chain disruptions stemming from the U.S. war with Iran. The higher fuel costs are squeezing businesses across various industries in California, which has massive trucking and agricultural sectors that rely heavily on diesel to power equipment.
Mahil said his fuel costs are up 40% from this time last year. When there’s an occasional slump or dip in the oil market, he orders several truckloads of fuel. But other businesses usually have the same idea, and the fuel depots often run out those days.
California diesel prices set a new record earlier on in the war, at around $7.75 in April. Greg Dubuque, general manager for a trucking fleet based out of Montebello, noted that the cost to fill his trucks in California has gone from around $1,200 in April to $1,800. Gene Seroka, executive director of the Port of Los Angeles, said more than two-thirds of cargo moving in and out of the port is carried by trucks.
And of the some 1,200 trucking companies that do business at the port, more than 50% are small to medium-sized companies that are seriously struggling with prices, Seroka said. The turmoil in the Persian Gulf region is forcing cargo away from the Suez Canal and onto a longer route around the southern tip of Africa, creating longer transit times that burn more fuel and drive costs up further, Seroka said. Increased diesel prices are pushing up the cost to transport food.
Frozen and refrigerated goods, such as fresh produce, are most sensitive to price increases because diesel is typically used to power both cold storage and transportation. Nick Vyas, supply chain expert and professor at USC Marshall School of Business, said that while companies try to absorb some of the cost increase, grocery prices are starting to tick up in stores. Though grocery costs may decrease slightly once fuel costs stabilize, they are unlikely to return to pre-conflict baselines as retailers adjust to higher prices, Vyas noted, pointing to sustained increases in food costs post-pandemic.
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