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A decrease in diesel fuel is causing prices of most goods and services to increase

While experts say fuel supplies have increased, other factors are causing prices to stay high
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Posted at 6:39 PM, Nov 23, 2022
and last updated 2022-11-23 19:00:24-05

INDIANAPOLIS — Inventory of diesel fuel is tight here in the United States. Prices remain higher than normal despite decreasing by about seven cents in the last few weeks. Those increased prices are causing the price of other goods and services to increase.

"Right now, the market is kind of trending down and fuel prices are increasing,” Dennis Knottingham, the Co-Owner of Advanced Trucking, said. “So, I think a lot of smaller carriers are going to suffer and I think we are going to see a lot of smaller carriers exit the business. They are not going to be able to survive. "

Knottingham has a fleet of about 50 trucks. When he first started his business in 2016, things were going well but now diesel prices are taking a toll.

"We have to charge more as far as our fuel surcharges ... so that affects the overall rates for the shippers and receivers and what we have to charge them," Knottingham said.

Increased fuel and diesel prices create a trickle-down effect. Trucking companies are spending more money to haul goods, so prices for them to get to where they need to be are higher.

"Anything with shipping is going to be more expensive,” Eric Schansberg, a Professor of Economics at Indiana University Southeast, said. “So that affects, you know, in store purchases because they have to get the product to the store for us to buy or it's more direct like if you’re dealing with Amazon or UPS. "

While experts say a true diesel shortage is unlikely, there has been a reduction in supply for multiple reasons.

"Refining capacity has fallen because of COVID,” Patrick De Haan, the Head of Petroleum Analysis at GasBuddy, said. “We are down about a million barrels a day. What the government could do is back off the incentives for refineries to convert to renewable products, but that's been years in the making though; you can't really undo that. So, the administration is somewhat helpless in this; there's not really policy they can reverse. "

De Hann says a lot of refineries are hesitant to expand their capacity because they lost billions during the COVID-19 pandemic. Plus, several countries are moving away from using fossil fuels. Another major factor to the increased prices is the war in Ukraine.

"The primary catalyst to diesel is Russia's war in Ukraine and once that changes, once Russian exits Ukraine, there could be some improvement there, " De Haan said.

A few refineries in the Midwest have been undergoing maintenance over the last few months which is one reason why supply has been tight in the Great Lakes region. De Haan says once those improvements are finished, prices should decrease.