High diesel costs force companies to raise prices

Gasoline gets the most attention when fuel prices rise, even though nearly everything in the typical American household got there with the help of diesel.

Both types of fuel reached record prices this month. But the broader impact could be felt with diesel, which powers everything from the farm equipment that helps produce the food in our refrigerators, to the tractor trailers that haul most of the produce sold in stores, to the trains and ships that transport some goods. , to construction equipment used to build homes and other structures.

“Basically, what it comes down to is diesel is how the economy moves,” said Denton Cinquegrana, chief oil analyst for the Rockville, Maryland-based Oil Price Information Service.

Many of the companies that pay rising diesel costs to make and deliver products will recoup at least part of their expenses by raising prices for customers.

Long Island’s diesel-dependent businesses are feeling the pressure as fuel prices hit highs this month not seen in nearly 14 years.

Diesel power touches just about everything at Sujecki Farms & Nurseries, which owns 175 acres of farmland in six locations from Calverton to Jamesport, said Jon Sujecki, a fifth-generation farmer who co-owns the business with his wife, Kristy.

Jon Sujecki, co-owner of Sujecki Farms & Nurseries, says his costs...

Jon Sujecki, co-owner of Sujecki Farms & Nurseries, says his costs have skyrocketed.
Credit: Randee Daddona

The price of diesel needed for the farms’ 12 tractors has doubled, and the cost it pays trucking companies to haul cargo is up 30% compared to last year, said Sujecki, whose farms grow fruit, greens and California privet, a shrub used as a hedge in patios.

The cost of farm fertilizer, which is a petroleum-based product, has almost doubled in the last year, from $500 to $950 a ton, he said.

Also, diesel is used to run irrigation systems at Sujecki Farms, and that process will start in May and end in October, he said.

Farm costs have skyrocketed. … I feel like there is no end to this right now,” Sujecki, 36, said.

Most of his customers are produce brokers, who sell to restaurants and supermarkets, and nursery brokers, who sell plants to garden centers, he said.

It raised farm prices 7% over the last year, mainly due to the rising cost of diesel, and some of those costs are being passed on to retail customers, he said.

Workers load privets from a tractor onto a truck at Sujecki Farms & Nurseries...

Workers load privets from a tractor onto a truck at Sujecki Farms & Nurseries in Jamesport on Wednesday.
Credit: Randee Daddona

Trucks do the heavy lifting

The average price of diesel reached record highs on several days in March, with the national price peaking at $5.14 per gallon on March 12 and the Long Island price rising to $5.36 per gallon on March 13, according to AAA. .

Uncertainty amid the Russian invasion of Ukraine on February 24 and low global diesel inventories have pushed prices this month to levels not seen since 2008, Cinquegrana said.

Meanwhile, trucks still make up the majority of the country’s freight transportation, 73%, but in New York state, the rate is 94%, said Kendra Hems, president of the New York Trucking Association, a trading group based in Clifton.

For trucking companies, fuel costs are typically the second highest cost, after labor, Hems said, but these days, fuel is the highest cost for some.

He said that the most affected companies at this time are the small ones with 20 trucks or less; those small operations account for 90% of the country’s trucking companies.

“Smaller carriers can’t always afford to abandon contracts” for less profitable deals with potential customers as supply chain challenges and consumer demand persist, he said. “And if these companies can’t weather the storm, we’re going to have more disruptions in the future.”

Companies contract with Shea Trucking in West Babylon to move various types of cargo, including steel, granite, furniture and cosmetics, between ports and warehouses in New Jersey and New York and other destinations, said Jim Shea, president. The business also transports goods from airports, said Shea, who said the company has 14 straight trucks, 12 tractor-trailers and 28 trailers.

Trucks in the yard of Shea Trucking in West Babylon.  President...

Trucks in the yard of Shea Trucking in West Babylon. Chairman Jim Shea said the company had to increase its fuel surcharge.
Credit: Thomas A. Ferrara

“When it comes to fuel, it goes up and I have no choice but to charge the cost to my customers,” Shea said.

About three weeks ago, Shea Trucking raised its fuel surcharge, the fee customers pay based on the weight of goods transported, from 25% to 35%, the highest since the company was founded 50 years ago. said.

Trucking remains the most efficient method of moving cargo because of the time factor, said Avery Vise, vice president of trucking for FTR Transportation Intelligence, a market analysis firm based in Bloomington, Indiana.

“It’s probably not as efficient as rail in terms of costs, but there’s a balance with carriers,” especially during the COVID-19 pandemic, when consumer demand is strong and inventories are under pressure, he said.

‘Cannot trim’

Bill Gellert co-owns 54 restaurant franchises in 10 states, including nine Five Guys restaurants in Suffolk County, under Gellfam Management Corp. in upstate Hillsdale.

Fuel surcharges charged by food distributors to deliver produce via tractor-trailer trucks to restaurants have doubled in recent months, said Gellert, who said inflation linked to rising product costs and wages of employees were already putting pressure on the business.

“You can’t reduce staff because if you reduce staff, you reduce service. And if you cut the service, who is going to want to go to our place? she asked her.

Rising fuel prices have increased overall Long Island restaurant costs by almost a full percentage point, Gellert said.

“On Long Island, that would be more than $10,000 a month” higher than last year, he said.

Therefore, the company has invested more money to implement technology to run more efficiently, including scheduling employees more appropriately, based on customer demand, he said.

One of Sujecki Farms’ produce customers is grocer Stew Leonard’s, a chain of seven supermarkets based in Norwalk, Connecticut, including two on Long Island.

Container trailers at the loading dock of Stew Leonard's supermarket...

Container trailers at the loading dock of Stew Leonard’s supermarket in East Farmingdale.
Credit: Newsday/Steve Pfost

Stew Leonard’s fuel costs for its stationary refrigerated trailers and about a dozen tractor-trailers that ship products between its stores and distribution centers are up more than 28% in 2021 compared to 2020, spokeswoman Meghan Bell said.

“If fuel prices continue to rise at the current rate, we expect to see a more than 56% increase in fuel costs in 2022 over 2021,” he said.

The grocery store has tried to offset some of the rising costs of fuel, food and employee wages by raising in-store grocery prices by about 3.5% since the start of the year, Stew Leonard said. Jr., president of the supermarket chain.

“So, our family has been a bit late on that. So we don’t want to start lifting everything… we’re stuck between a rock and a hard place right now,” she said.

new heights

Diesel prices have reached record highs this month. Here’s how the numbers stack up nationally and on Long Island.

Average price of diesel per gallon in the US

Previous record before this month: $4.84 on July 17, 2008

Current record: $5.14 on March 12

Friday Price: $5.08

Price one year before: $3.10

Long Island average diesel price per gallon

Previous record before this month: $5.15 on June 14, 2008

Current record: $5.36 on March 13

Friday Price: $5.31

Price one year before: $3.17

Source: AAA

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