The pandemic had caused the highest spike in both gasoline and diesel prices that the United States have ever experienced. However, due to the freight recession found throughout the United States, the trucking industry has started to see the diesel prices falling. They have been cut in half since just one year ago, which is a signal of a slowdown of the economy.
Over the past year, the United States has seen a freight recession, which means there are fewer trucks delivering goods throughout the country. Due to the slowdown in deliveries, diesel prices have dropped by about half since the previous year.
Thanks to an abnormally warmer winter, the diesel industry took a dip, as the industrial trucks did not have to burn as much fuel to keep warm over the winter seasons. According to the Wall Street Journal, this diesel slowdown has been magnified due to diminishing factory output and a low demand for on-hire trucks.
The Wall Street Journal even noted the prices for Wholesale diesel in New York Harbor had fallen to $2.65 a gallon, compared to $5.34 just last May. Furthermore, Benchmark diesel futures had called 25% to $2.53 a gallon, and the demand domestically for diesel is down 8.4% compared to the previous year.
According to recent results, there are a number of indicators that point towards a steep decline in freight, further hurting the diesel industry. The American Trucking Association’s for-hire contract truck tonnage index had dropped to 95.8 in March, which is a 6 point drop compared to January (101.3). This is coincidentally the lowest level of for-hire truck tonnage index since August of 2021. Furthermore, truck spot loading postings were down an astonishing 70% in March of 2023 compared to March of 2022. Unfortunately, the low demand for freight has ultimately hurt the smaller trucking companies much harder than the larger companies.
According to the JB Hunt executives, on an earnings call just last week, they are warning of a freight recession as the shipping company had missed earnings views. Furthermore, they had reported drops in volumes across the board that have sent retune per truckload down by 17%. This index mostly considers contract freight, but the data does suggest that the spot freight market has been hit harder. Previously, the executives forecasted a rebound in industrial activity in the second half of 2023. However, recent numbers hint that recovery is less certain due to the broad economic slowdown.
Spot markets, which are typically relied on more by smaller companies, are one-time prices to move freight. Spot market rates are entirely dependent on the current market conditions, which is why smaller companies were thriving during the pandemic when demand was high, but are now suffering due to a low demand. Spot load postings were down about 70% compared to March of 2022, this is according to DAT Freight & Analytics.
Further signs of a recession have come about outside of the trucking industry. The Leading Economic Index, by Conference Board, had suggested that a recession will hit in the middle of 2023. According to the New York Fed’s Recession Probabilities Model, the odds of a recession are at 57.7%, which is the highest percentage of chance since 1982.
Overall, there are a number of factors that have influenced the freight industry in recent years. In turn, the freight industry has impacted diesel prices quite drastically, causing diesel prices to drop significantly over the past year. Due to these prices and other factors, many major companies are preparing for a freight recession within the coming year, even as soon as July. The freight industry is one of the major industries within the United States, and if there is a recession in freight, that will have devastating impacts on the United States economy on a whole. As the diesel prices fall and the freight volume continues to drop, economists are unsure as to how long the trend will continue and what the long-term impact will be.
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