98: Supply Chain Hot Topics: The Diesel Gap Is Coming for Your Balance Sheet

Oct 12

3 min read

Why is diesel swinging so wildly, and what is the surcharge lag costing your supply chain?

It's week two of Supply Chain Hot Topics, and Courtney and Katie are back with one number: $1.85. That's the gap between a gallon of diesel and a gallon of regular gasoline right now, after it topped $2 just two weeks ago, an all-time record. Big thanks to listener Jen Hansen, who asked for a deep dive on why diesel prices are swinging so wildly. This one's for you, Jen.

Diesel went from $3.50 a gallon in January to a record $6.53 in late September, smashing the 2022 high, while regular gasoline never broke its historical peak. So why did diesel split off? The U.S. pumped record crude oil this past year, but diesel has to be refined, and global refining capacity for middle distillates (diesel, jet fuel, and home heating oil) is brutally tight. Middle East shipping reroutes and European energy shifts have pulled global diesel supplies to emergency lows. Katie layers on what's happening at home: farmers are running harvesters 18 hours a day during fall harvest, regional grain haulers are moving crops, and winter heating oil demand is ramping up, all competing for the same distillate molecule. For a sense of scale, filling a 250-gallon Class 8 rig now runs roughly $1,550, and most long-haul trucks fill up daily.

The real pain isn't just that diesel is high. It's that it's volatile. Most supply chain budgets are built around static numbers or slow trends, and surcharge tables were designed for fuel that drifts, not fuel that leaps 40% in two months. That's the surcharge lag: if your freight contract resets fuel surcharges monthly or quarterly, your pricing is looking in the rearview mirror. On a standard 700-mile truckload haul, the fuel line item jumped from $350 in March to about $595 by mid-April. For the fictional Hypothetical Widgets company moving 100 truckloads a week, that's $24,500 a week, or roughly $1.3 million a year, in unbudgeted variance without shipping a single extra box. Ocean carriers are adding emergency bunker adjustment factors, rail operators are updating fuel matrices, and air cargo is feeling jet fuel spikes too. Then there's the ratchet effect: surcharge tables that step up fast don't always step down at the same rate when diesel eases.

So what can you do on Monday morning? You can't control global refining or geopolitics, but you can control how your contracts handle volatility. Courtney walks through five moves: pull every fuel clause and confirm whether it's based on the weekly EIA index or regional PADD indexes, shift from monthly or quarterly adjustments to weekly resets, audit your TMS against carrier billing so both use the same DOE Monday release date, run scenario models across diesel price points for Q4 and Q1, and negotiate symmetric surcharge step-downs. Katie flags these audits and models as a great internal AI use case. And when the CFO calls asking why transportation spend is 15% over budget? Frame it as a range, never a single number, isolate market price from surcharge timing gaps you're actively fixing, and bring the operational plan, from weekly resets to modal shifts like moving long-haul freight to intermodal rail, along with the problem.

Your homework: how often does your freight contract reset fuel surcharges? Weekly, monthly, or quarterly? And has the lag hit your budget this year? Drop your answer in our newsletter comments or on Instagram.

In this episode, we discuss:

0:00 – The $1.85 Diesel Gap

1:00 – Welcome to Week Two of Supply Chain Hot Topics

2:08 – What the EIA Is and Diesel's Record-Breaking Run

2:54 – Why Diesel Split from Gasoline

4:28 – What It Costs to Fill Up a Class 8 Rig

5:06 – The Surcharge Lag

5:54 – Hypothetical Widgets: $1.3 Million in Unbudgeted Variance

6:52 – Bunker Surcharges and the Ratchet Effect

7:27 – The Ripple Effect Across the Supply Chain

8:52 – Five Fuel Clause Moves for Monday Morning

10:36 – When the CFO Calls