Truck drivers, businesses on Long Island feeling the pain of Iran war-driven diesel costs

Michael Young's trucking company makes daily trips from New Jersey to Long Island, delivering solar panels and other goods to businesses in the region.

The trips normally cost his drivers a couple hundred dollars in diesel per trip for a full tank.

But two weeks ago, one of his driver's company credit cards stopped working while fueling. Alarmed, Young, who is co-owner of A1 Xpress Messenger and Trucking of Freehold, New Jersey, checked the card’s statement to find that the cost of diesel at the pump had exceeded the card’s limit.

“It really punched me in the face,” said Young, whose company owns more than a dozen 26-foot-long diesel-powered box trucks. Over the last month, he said the cost to fill one of his large trucks jumped about 27%, from $275 to $350.

It’s a “huge impact” on his small business, he said, adding the increase is eating into his company’s profitability.

Businesses and trucking companies that rely on diesel are feeling the sting of rising prices since the Iran war began Feb. 28, with diesel prices rising more than 37% on Long Island. Combined with existing challenges, from inflation and a higher cost of doing business, some businesses say they are taking preemptive measures to mitigate cost increases, including renegotiating contracts and passing along costs to customers.

“It’s fair to say that the economy runs on diesel,” oil industry analyst Denton Cinquegrana said. “Anything you buy in the store … it is getting there by a vehicle fueled by diesel," said Cinquegrana, who is chief oil analyst at the Oil Price Information Service, which provides global pricing and analytics for the energy sector.

Price at the pump

The price of diesel, used primarily in trucks, trains, buses and to power heavy machinery, has increased by nearly $2 a gallon since the U.S.-Israel war in Iran began Feb. 28, according to data from AAA Northeast. On Long Island, the price of diesel reached $5.75 a gallon earlier this week. 

The jump in price is significant, fuel experts said, but still below the Island’s record high diesel price of $6.65 a gallon in May 2022 after the United States levied sanctions against Russian oil exports following the invasion of Ukraine.

Nationally, the average price of diesel climbed to $5.37 a gallon earlier this week, a 36% increase over the same time a month ago, according to AAA. Unlike gas on Long Island, which traditionally costs less than the national average per gallon, diesel, a distillate derived from crude oil, is taxed at a higher rate, driving its price higher, experts said. 

“Diesel is always more expensive than gasoline because it faces a higher level of taxes,” at the federal, state and municipal levels, said Robert Sinclair Jr., senior manager of public affairs at AAA Northeast.

Trickling costs impact consumers

Increasing the cost of transporting goods on and off Long Island is bound to increase the costs of consumer goods, industry experts and economists said.

“The cost of manufacturing a product and shipping it some place could be higher, and to bring goods onto Long Island could also cost more,” said Steven Kent, chief economist for the Long Island Association business group.

If diesel continues to go up, Young, of New Jersey, said, he is planning to implement a 5% increase to his base rates, ranging between $595 to $995 for a trip from New Jersey to Long Island.

“If this keeps going I might increase my costs to help offset the increase,” he said

To deal with higher costs, trucking groups say they are spending money to improve their  fleets ' fuel efficiency to combat rising fuel prices. Some like Young are using rewards-based business credit cards to save money.

Meanwhile, Pronto Manufacturing of Ronkonkoma, a machine shop that makes custom parts for other businesses, is renegotiating previously signed contracts for custom components with its clients in light of higher costs it is seeing. 

Long Island’s reliance on trucks

More than 96% of goods and supplies, including food products and construction materials, are transported to New York and Long Island by trucks, higher than the 71% of goods transported by trucking in the rest of the country, according to the Trucking Association of New York and U.S. Census data. 

That reliance on trucking has a direct impact on diesel prices, which is passed on to the price consumers pay for goods.

“When you have cost fluctuations it has a huge impact on operations,” said Zach Miller, vice president of government affairs for the Trucking Association of New York, a statewide trade group.

Besides trucks, Miller said, other operational equipment such as warehouse forklifts at factories and distribution businesses also rely on diesel.

Jamie Moore, president of Ignite Long Island, a trade group representing manufacturers, said recent upticks in diesel present “a major concern."

“Diesel prices impact shipping costs and transportation costs, not only for your finished products, but your whole supply chain,” Moore said. “But you also have backup generators and forklifts and some of your machinery impacted as well.”

Long Island’s manufacturing sector encompasses roughly 3,000 businesses that bring in annual earnings of nearly $125 billion, according to Ignite Long Island. Statewide, the industry employed 327,540 in the state, paying more than $22.5 billion in wages in New York in 2023, according to the Trucking Association of New York.

Mike Silvestri, director of manufacturing operations at Pronto Manufacturing in Ronkonkoma, said higher diesel costs have affected his business operations.

Pronto, which makes custom components for businesses, has seen the cost of materials increase by around 10% to 15% over the last month. As a result, the company has raised customer prices, Silvestri said.

Young said raising customer's prices could push his clients to competitors.  "It’s the one thing customers don’t want to hear," he said.

But the longer prices stay high, the fewer options he has.

“There’s not much to really do,” Young said. “You can’t really get around it.”