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Diesel and gas prices expected to stay high for another year, executive survey says
High diesel prices affecting consumers and businesses across the nation will take at least another year to return to 2025 levels, according to an anonymous survey of 100 oil and gas company executives conducted by the Federal Reserve Bank of Dallas.
OAKLAND, Calif. - High diesel prices affecting consumers and businesses across the nation will take at least another year to return to 2025 levels, according to an anonymous survey of 100 oil and gas company executives conducted by the Federal Reserve Bank of Dallas.
Oil execs' outlook isn't good
The projected timeline poses a significant challenge for the national economy. Data from the U.S. Census Bureau shows trucks deliver $10 trillion in goods annually, accounting for almost three-quarters of all goods consumed in the United States.
For many drivers, lower-cost gas stations such as ARCO have become a refuge in a high-priced market where fuel costs sit roughly 150% higher than before the war.
"It is frustrating, being that we don’t have an ability to do anything. But expect the fact that we need to drive, we're gonna purchase the fuel," said ARCO customer Kasorn Piamsukon.
"I think once they figure out we'll pay it anyway, the incentive to lower the price really doesn't exist," said ARCO customer Philip Leonida.
Other contributing factors
While crude oil remains the largest individual component of retail fuel prices, processing and distribution costs also play a major role. However, two specific supply chain expenses have experienced dramatic spikes: the fuel burned by oil tankers during transit and the cost of maritime insurance.
An ultra-large tanker—many of which navigate through the strategic Strait of Hormuz—can carry as much as 4 million barrels of crude oil. Prior to the war, a supertanker burned nearly $2 million in fuel for a single delivery run. Today, that operational cost has risen to almost $3.5 million per trip.
War-zone insurance rates have placed an even greater strain on maritime shipping. Before the conflict, insuring a supertanker's voyage cost $1.3 million or less. Current rates have skyrocketed to $15 million or far higher per trip.
Jatin Dua, a University of Michigan professor who focuses on global regulatory regimes and the economies of maritime mobility, noted that maritime insurance adjustments move slowly.
"Insurance markets tend to be conservative. They tend to take time in order to scale down risk assessments, partly because the cost of getting it wrong is very high and that's a cost that is going to stay for a long time," Dua said.
Consumer skepticism
Consumers express skepticism over whether market conditions fully justify the steep increases.
"Somebody is always gonna want to take a bigger cut that they might be entitled to, and I certainly don't put insurance companies past that," said ARCO customer Lon Lazar.
Leonida noted that those maritime expenses ultimately fall on everyday drivers at the pump.
"I think it's over …they're at the $6 a gallon price, probably. You know, costs roll downhill. I think that's a pretty standard of business, right?" Leonida said.
Piracy resurgence
Maritime shipping faces additional compound threats in the region, including a resurgence of piracy off the coast of East Africa.
"You've had this year of a very sharp uptick in the number of attacks, including successful ones, targeting oil tankers," Dua said, referring to Somali pirate activity hijacking vessels.
Industry experts warn that if regional hostilities worsen, the time required for the economy to recover from these elevated fuel prices will extend even further.