Record diesel prices could further drive up costs for Bay Area consumers

Record-high diesel prices are putting new pressure on trucking companies and consumers, with economists warning that the rising cost of moving goods could soon lead to even higher prices at grocery stores and elsewhere.

According to GasBuddy, the national average price of diesel reached $5.82 a gallon on Thursday, surpassing the previous record set in 2022. California drivers, however, are paying significantly more.

At Oakland's Golden Gate Petro station, the cash price for biodiesel was $8.29 a gallon on Thursday. At a nearby Shell station at Seventh and Market streets, diesel was selling for $8.39 a gallon.

Experts said California's diesel prices are roughly $2 higher than the national average because of a combination of higher taxes, the state's limited refining capacity and the escalating wars in Ukraine and Iran.

"Both of those conflicts have led to a reduction in the amount of oil that's available - that raises both gasoline and diesel prices," said Aaron Smith, a professor at the University of California, Berkeley. "And then a reduction in the refining capacity that turns crude oil into diesel."

Smith, a member of UC Berkeley's Energy Institute at the Haas School of Business, said government policies also contribute to California's higher diesel prices.

"We also have a lot of policies, both at the federal level in the United States and in California, that require us to put a lot of biofuel into our diesel supply, and that also raises costs, and that's been raising costs also a lot this year," Smith said.

For truck drivers, the higher prices are already having a major impact. One driver filling up his big rig at Golden Gate Petro spent $330 on fuel. He said the same fill-up cost less than $200 before the war in Iran began six months ago.

Bill Aboudi, president of A-B Trucking in Oakland, said his company is feeling the impact of rising diesel prices and has had to pass some of those costs along to customers.

"It's a perfect storm. And we're feeling it," Aboudi said. "And when we feel it, it passes to our customers, then that passes onto the consumer."

Aboudi said diesel prices have nearly doubled since the Iran war began in late February. His company added a 15% fuel surcharge for customers on top of an existing 40% surcharge.

The concern for consumers is that those additional transportation costs could eventually affect the price of nearly everything.

"When diesel prices are high, unfortunately, what that means is that everything else will be higher," said Rey "R.T." Trevino, president of Pecos Country Energy, an oil and gas exploration and production company. "Why? Because it takes diesel to get us from point A to point B."

Smith made a similar point.

"When you go to the grocery store, everything that you buy there was shipped from somewhere else," Smith said. "It was shipped on a truck that was powered by diesel."

For Oakland resident Brittney Sterling, rising food prices are already stretching her budget. On Thursday, she drove an hour to a WinCo Foods store in Pittsburg for her monthly grocery shopping trip, hoping to save money and stretch her $300 food budget through the entire month of September.

"It's hard because sometimes you go into the store, you'd be, like 'Oh, I want this and this and this,'" Sterling said. And then you've got to take some of that stuff back because you don't have enough [money] to get it."

Sterling said prices have increased across the board, particularly for meat.

"It's really ridiculous because living out here is expensive as well," she said.

The groceries she bought Thursday will have to last for the entire month, Sterling said. When her food budget runs short, she sometimes relies on family members for meals.

"I have to make it every once a month just to eat and survive," Sterling said. "I have to go to my family to eat from time to time. It's sad because it's really expensive."

And relief may not come anytime soon.

Trevino said diesel and gasoline prices would normally be expected to decline at this time of year as summer travel ends and demand drops. But that seasonal decline has not materialized.

"As far as the price, I do expect us to be a little bit more unrest," Trevino said. "It is very surprising because you hit the nail on the head. Usually this time of year, travel has dropped, which means that the demand has dropped for gasoline and diesel. And this year, we have not seen that."

Some trucking companies are calling on the federal government to temporarily eliminate the national gas tax to provide consumers and businesses with some relief.

"What this administration could do is remove the national gas tax, and of course, during the summer, there was talk about doing so," Trevino said.

Experts said an end to the conflicts overseas could bring a meaningful reduction in fuel prices. Until then, trucking companies said they will continue passing higher fuel costs through the supply chain - potentially leaving Bay Area consumers to pay more for groceries and other everyday goods.