The cost of diesel on the rise

Consumers are seeing a jump in the price they pay for a gallon of gas as summer approaches, a major driving season. The expected additional cost to drive this summer is about $200 more per family compared to 2017.

The same goes for a fuel that farmers heavily rely on to grow food and that the agriculture industry uses primarily to deliver those goods to market, diesel fuel.

“About 65% of all goods transported in the U.S. are moved by trucks that use diesel,” said Veronica Nigh, an economist with the American Farm Bureau Federation. “So, when the economy heats up we also seeing diesel prices rise and that is what we are seeing now.”

Compared to just a year ago, the price of diesel has climbed over 20%, which is equivalent to 50 cents per gallon.

“Unemployment is lower, consumers have more money in their pockets and they are out driving and buying more things,” Nigh said. “That increased demand is certainly having an impact on diesel prices.”

That has many wondering if diesel costs will reach the gaudy levels of 2013-2014, which was up around $4.00 a gallon. Nigh said it is hard to tell.

“The economy doesn’t show any signs of slowing down, so that underlying reason for increased demand for diesel fuel is strong,” Nigh said. “Today at about $3.20 a gallon we would have to come up quite a ways to reach those levels, but oil production is good as we have recently seen some of the highest levels of production in the last 30 years.”

For agriculture, diesel works into the cost of production equation. That will have a trickle-down effect at the farmer and consumer levels.

“Unfortunately at the farm setting, we don’t have a lot of ability to effect the prices we receive for inputs so higher diesel prices mean more of a squeeze on those already incredibly tight margins,” Nigh said. “On the consumer level, you can probably expect an increase in food prices. We’re not looking at a huge increases, but 2 or 3 cents across the whole portfolio of food items that you might buy adds up.”

Farmers in the Midwest do have a bit of a regional advantage on the price of diesel. West Coast prices have averaged a whopping 40 cents per gallon higher than the national average since January. East Coast prices have averaged 3 cents per gallon higher, while Midwest prices have averaged 6 cents per gallon lower.

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