Diesel Prices Hit Record High

I'm Jennifer Crawford. A record setting increase in the cost of diesel fuel across the country and in Florida, triple A, reporting today's average price of a gallon of diesel fuel is almost $6. That is the highest average price ever recorded. The national average of diesel just one year ago was $3.70 per gallon. And today in southwest Florida, triple A says the cost of diesel is in line with the rest of the country at almost six bucks per gallon. The ripple effect impacting just about every single thing we buy. Economics expert and professor at Florida Gulf Coast University's College of Business Doctor Victor Clark joins us now in studio. Thank you for joining us. Great to be here. We have been discussing diesel. It is the lifeblood of the global economy and the price is soaring. It has set a record high I believe right now it's about six bucks nationwide per gallon. How does this impact our lives on a daily basis? Diesel fuel. We don't think about it very much because unless we're driving a diesel vehicle or a diesel truck as our getting around vehicle, we don't really think about it. But every price that we pay for almost every good or every service is influenced by diesel. Because you think about buying just one product, maybe broccoli down at your local Publix or your Walmart or your Super Target. That broccoli started out on a farm. Farm equipment uses diesel fuel. And then that broccoli that had a broccoli was trucked from the farm to a place where it was processed for sale, and then it was shipped to a distribution center by for a grocery wholesaler. And then eventually it went to your grocery store. And every time that gets on a truck and moves from one location to another, that's one more cost that is incurred along the supply chain. It really is true. Diesel is the lifeblood of the supply chain, and the more something gets shipped around, even if it's a short distance. This really adds up over time. So how much do we rely on diesel and we don't even realize it? Most farm equipment, harvesters, compounds those are almost exclusively using diesel fuels. Tractor trailers exclusively using diesel fuels. Other farm equipment like tractors, mostly diesel fuel. So there's a lot of diesel fuel that's going on on that supply chain. And we just go to the store and we purchase a thing. We see that the price has gone up. We don't know why. We may not even need to know why. All we know is that it feels like we've got another tax that's hitting us in our pocketbooks, just like all the additional price inflation that we've had to cover during the last 5 or 6 years, and how impactful on shipping there's so many shipping, trucking and trains to transport products. Yeah. The problem is that if you've got a diesel tractor or a diesel harvester, if you're a farmer, or if you've got a diesel tractor trailer, when the price of beef goes up for me, I can go to the grocery store and put down the beef and pick up the chicken and eat that instead, and make the money work a little better. If I've got a diesel powered tractor trailer, I can't buy an alternative fuel to put in the tank of my truck that I currently have. It's just not possible. So when you've got a demand for diesel fuel, that's pretty constant. As long as the supply chain continues to hum along, that demand for trucking isn't going to go away anytime soon. Those truckers and other people use diesel. They have to pay those higher prices. So it's just across the board. It is across the board. One thing your viewers may not know, because I'm an economist and we geek out on this sort of thing. Diesel fuel. The federal tax on diesel is higher than it is for conventional gasoline. So the federal tax on a gallon of gas for me is about $0.18 a gallon. It's about $0.24 a gallon for diesel. So even if we didn't have a current surge in prices, diesel prices are always a little higher. Now we have seen this increase sharp increase in will and gas. What is behind this now? Just increasing in diesel. It's the same thing that we've been incurring ever since the conflict in the Middle East started supply chain issues over the Strait of Hormuz, refining capacity, other processing. And anytime you've got an interruption in the supply chain at any point, because everybody around the world is thinking about where they could get all and what they could process and turn it into, because you can turn a barrel of oil into lots of different finished goods gasoline, diesel, fuel oil, kerosene. There's a lot of competition for that. And when the price at on commodity market spikes, the price is going to be passed along to everybody else. And do you expect it to go even higher? Yeah. We had a new producer price index released this morning. And if you take the price increase just in August and producer price index, that's like the consumer price index, CPI tracks what I pay producer price index tracks what firms pay the producers of goods and services. If you take the price increases in August they were about 5.5%. And a lot of that was the increase in the diesel price. And that's an annual rate, 5.4 5.5%. But that only includes August when we get the number for September at the beginning of October, then annualized rate might very well be even higher than an annual and inflation rate for producers of about 5.4%. More to come, more to watch and keeping you busy. Yeah. It's it's these are these are challenging times. And one last thing. The people who are hit the hardest by these kinds of inflationary costs are the people who have to make the money work. Working poor young families, working class households, relatively affluent families. They can handle these kinds of increases. But it's really, really difficult if you're trying to make your rent payment and put food on the table and get to work and do the other things that you need to do in your life and increase in the price of broccoli may not seem like a big deal to a privileged person, but if you're trying hard to make the money work, it just feels like a tax that never ends. All right, doctor Victor. Claire, thank you for joining us again today. Thank you.