Who would have guessed that in the great energy shortage of 2022, it would not be a lack of natural gas or gasoline that does us in, but diesel?
Diesel fuel. Most of us don’t buy it, but all of us rely on it. Diesel powers the cargo ships and the oil tankers the bring goods from distant shores. It fuels the trucks that bring food to our grocery store shelves and move products across the country. It powers the tractors, combines and other farm equipment that produce the food that keeps us alive. Diesel fuel also powers the heavy construction equipment that builds the roads we drive on, mine the minerals our manufacturing sector relies on, harvests the trees that produce lumber and many other goods, and produces many of our commodities. It even powers freight trains and many of the military vehicles that fight our ground wars.
Diesel plays a critical role in our lives, even if we never buy a drop. Without diesel fuel, commerce stops, and the world grinds to a halt. We’re not there yet, but when diesel fuel gets expensive, so does everything else.
Diesel Fuels Inflation
That’s where we stand now. The rising price of diesel fuel is making everything shipped more than a few miles more expensive. Those rising costs are getting passed on to the consumer as higher prices.
Farmers are paying more to fuel their farm equipment, raising their costs, which they have to pass on. The trucks and trains that deliver food to the processor and then deliver finished goods to the distribution centers and stores are paying more for fuel, so the wholesalers and retailers have to charge more. All we see is that food prices keep rising. Part of that is shortages, but a large chunk of that increase is rising diesel prices.
Even shipping small packages costs more. UPS, for example, raised their fuel surcharge to 17.5 percent for ground shipments. The surcharge for FedEx Ground is 18.75 percent, up one percent in the past week. FedEx Freight for shipments from one pallet to one truckload, carry a 47.8 percent surcharge. That means a pallet that used to cost $400 to deliver now costs $591.
The government bean counters will announce the CPI numbers for April on Wednesday the 11th. What do you bet the percentage the government reports for inflation isn’t anywhere close to these figures? Why? Because it is to the government’s advantage to under-report inflation.
It is Out of Our Hands
When gasoline prices rise, we can choose to drive less. We can combine errands, so we make one trip instead of several. At our house, instead of driving my truck, we can take my wife’s car, which gets better mileage.
There’s nothing you and I can do to control costs related to diesel unless we drive a diesel-powered vehicle. But farmers can reduce their fuel expenditures by planting fewer acres. For example, if a farmer can’t charge enough for their hay to cover their fuel costs, why go to the expense and trouble of cutting hay? If that happens, the ranchers that buy the hay are out of luck. If there’s nothing to feed their cattle this winter, they will have to slaughter them. That means less food next year.
Independent truckers can stop driving when it becomes unprofitable because of rising fuel prices. Many of these guys bid on jobs. If the jobs don’t pay enough to leave the house, they can stay home.
I’m expecting the guy who delivers my firewood and the fellow who brings dump truck loads of gravel for my driveway to raise their prices just to cover their costs. I need firewood to keep warm, but I can hold off on buying gravel for a year or two. That’s what many Americans will do: cut back on buying, defer big purchases, and do without conveniences and luxuries. That kind of behavior is why GDP fell in the first quarter and we’re already in a recession.
There’s No Substitute for Diesel
It’s easy for the Biden Administration to chide us when we complain about the high cost of gasoline and suggest we all buy electric cars (never mind how that much electricity would be generated or where all those rechargeable batteries would come from), but there’s no substitute for diesel fuel. Gasoline engines just don’t generate enough torque for many heavy-duty applications and electric vehicles aren’t ready for long hauls. If it takes two hours to charge an electric car battery to 80 percent at a fast charger, can you imagine how long a much larger truck battery would take?
We’re also nowhere near ready to produce electric container ships. It’s not like they can plug in to recharge on their way across the ocean, and solar panels are nowhere near efficient enough to keep them going.
Peak Inflation is NOT Here
You may hear that peak inflation is here, and the government expects the rate of inflation to drop. This is just another talking point (lie) they are pumping out to convince you they have the situation under control. It’s part of the spin designed to keep people from panicking. They lied when they said inflation as transitory and they are lying when they tell you we have passed its peak.
As long as the price of commodities, including oil and gas, continue to rise, inflation will not drop. Newsflash: The price of these commodities, especially oil and gas, will not begin to stabilize or drop until the war in Ukraine ends. And that assumes China doesn’t invade Taiwan.
Is it Time to Panic Yet?
Should you panic? Only if you are unprepared.
If you are prepared, should you be worried? Maybe. I think “concerned” would be a better word to describe my current state of mind. I’ll worry when we go to war with China or the food in my prepper pantry runs low.
Any way you look at it, things are going to get worse, and they are going to stay worse for months, if not years. That’s concerning.