The cost of moving food around the country is climbing fast, and the grocery industry is once again confronting a familiar question: How long before higher transportation costs begin showing up elsewhere in the supply chain?
The national average price of diesel has climbed to roughly $6.29 per gallon, up $2.55 from a year ago, according to the latest U.S. Energy Information Administration data. For trucking companies, fuel represents one of their largest operating expenses. But for the grocery industry and food trade, the exposure extends far beyond the trucking company itself.
Produce, meat, dairy, frozen foods, beverages and packaged grocery products routinely travel hundreds or thousands of miles before reaching a distribution center, and many take another truck ride before reaching a store. Each and every one of those miles has become significantly more expensive.
The historical comparison puts the increase in perspective.
As you can see, diesel averaged $2.30 per gallon in 2016 and $3.66 in 2025. At $6.29, the latest price is about 72% higher than the 2025 annual average and 173% above the 2016 average. The US Energy Information Administration (EIA) says the current price is the highest nominal level since its diesel-price series began in 1994.
Where prices go from here will depend heavily on crude oil, refining margins, inventories and global distillate supplies. EIA has pointed to tight global distillate supplies and elevated crude prices as drivers of the current increase, while U.S. distillate inventories were 13% below the five-year seasonal average as of Sept. 11.
For the food industry, however, the immediate issue is less about predicting diesel prices than figuring out how to handle the costs already moving through the system.
The First Hit Comes Through Freight
The trucking industry’s primary mechanism for dealing with volatile fuel prices is the fuel surcharge, generally tied to a benchmark such as the U.S. Department of Energy’s diesel price index.
As diesel rises, the surcharge rises according to the carrier’s formula.
That means freight inflation doesn’t always arrive as an obvious increase in the basic transportation rate. A shipper might still see a relatively stable linehaul charge accompanied by a much larger fuel surcharge. A $1,000 linehaul charge, for example, can carry a surcharge of several hundred dollars when diesel reaches these levels.
Drawing on my experience in distribution, this represents a fundamental, bottom-line increase in delivery costs. After all, it’s impossible to simply add Fuel surcharges to the cost of an individual case to a customer, as it fluctuates weekly and is not specific to the items, just a bottom line invoice charge.. The surcharge is an operating cost attached to moving the load, and allocating it neatly across the individual SKU’s is not practical . It manifests as an increased operational cost for each inbound delivery.
This can create an immediate squeeze for food wholesalers and regional distributors.
Inbound freight costs can rise much faster than long-term vendor contracts or customer agreements can be changed. Outbound delivery fees may also be fixed or at least difficult to adjust. The distributor pays more to bring product into the warehouse without necessarily having an immediate mechanism to recover that money from the customer.
For a while, the difference comes out of margin.
If diesel remains elevated, distributors will have to look for options. Expect them to look for other revenue streams and cost-reduction to maintain their bottom line.
Carriers Feel the Squeeze, Too
Fuel surcharges don’t necessarily make trucking companies whole.
Timing is one reason. Fuel prices can move rapidly while transportation contracts and surcharge formulas may reset weekly or according to a published index. During a sharp run-up, a carrier can spend the money at the pump before the surcharge catches up.
And fuel remains only one component of operating a truck. Carriers still have to pay drivers, insurance, maintenance, tires, equipment, financing, tolls, technology and administrative expenses.
Smaller fleets and independent owner-operators can be more exposed because they generally have less negotiating leverage with large shippers and may not receive the volume fuel discounts available to larger carriers.
There is also a cash-flow problem that becomes easy to overlook. A truck needs fuel today. The carrier may not be paid for the load for weeks. At $6-plus a gallon, the amount of working capital tied up simply keeping trucks moving can climb quickly.
If high diesel prices persist, weaker operators may park equipment or leave the market, potentially removing capacity from an industry that grocery companies depend upon every day.
Food Has Nowhere to Hide from These Costs
Few industries have more exposure to trucking than food distribution.
A load of fresh produce may travel from California, Florida, Mexico or another growing region to a distribution center hundreds or thousands of miles away. Meat and dairy products require temperature-controlled transportation. Frozen foods need continuous refrigeration throughout the trip.
In fact, the cold chain adds another layer of expense because maintaining temperature requires energy throughout transportation and handling. When the cost of moving the truck rises, temperature-controlled food already carries a more demanding logistics profile.
And the trip to the distribution center frequently isn’t the end of the journey.
Products move from manufacturers to warehouses, warehouses to distribution centers and distribution centers to stores. Some products pass through several points in the network before reaching the consumer.
Each movement creates another transportation expense and another opportunity for higher diesel costs to enter the product’s overall cost basis.
That makes efficiency much more valuable. Logistics managers can reduce deadhead miles through better route planning, combine smaller shipments into multi-stop truckloads, position inventory closer to customers and move suitable nonperishable freight to intermodal rail.
Those strategies can reduce exposure, but they cannot eliminate the underlying cost of diesel. There are only so many miles that can be engineered out of a supply chain built around trucks.
There’s a Tougher Question
The immediate effects of $6-plus diesel are relatively straightforward. Fuel surcharges rise. Carriers face higher operating and working-capital costs. Wholesalers and distributors get squeezed when freight increases faster than contracts and customer pricing can adjust. Temperature-controlled and long-haul food lanes carry greater exposure.
The more consequential question is what happens to those costs after they enter the pricing system.
Speaking as a former distributor, I know the middleman’s position in this equation well. Market pressures push costs higher, and everyone along the supply chain has to respond. But when the original pressure subsides, getting those increases back out of the system can be much harder than putting them in.
We saw that dynamic during and after the pandemic. Manufacturers faced legitimate increases in transportation, ingredients, packaging and labor, among other costs, and prices rose accordingly. As some of those extraordinary pressures eased, retail prices did not necessarily return to where they started.
There is an old tension between manufacturers and retailers here, as well. Manufacturers can be reluctant to pass along cost declines because they fear retailers will not pass the price declines to their customers, but simply take the higher margin. Manufacturers may promote more or more aggressively, but at the end of the day the consumer is simply looking at what it costs to shop weekly.
Going forward, both manufacturers and retailers must pay attention to the relationship between actual current costs to case costs to retailers and to shelf price to get to the point that consumers can afford to buy it.
The consumer sits at the end of that argument.
That is why the industry’s response to the current diesel spike matters beyond the next freight bill. Wholesalers and retailers need to understand how much of a supplier’s increase is tied to transportation. Manufacturers need to distinguish temporary logistics costs from permanent changes in their cost structure. Retailers need to decide how much they can absorb and how much must reach the shelf.
And everyone needs to pay just as much attention when those costs begin moving in the other direction.
At $6.29 a gallon, diesel has become a meaningful food-cost issue. If prices remain elevated, some of that expense will work its way through trucking companies, distributors, manufacturers and retailers and eventually into the economics of the grocery shelf.
The real test comes later.
If diesel eventually retreats, will the costs attributed to $6 diesel retreat with it — and will the consumer ever see the difference?