Record diesel prices push more freight from trucks to rail
Record-high U.S. diesel prices reached $6.285 per gallon, prompting J.B. Hunt to forecast a 5‑to‑10 percent sequential earnings decline in the third quarter. The carrier said it will face an additional $10 million in headwinds this quarter and its stock fell more than 13 percent after the conference. Intermodal volumes rose 4 percent in the first 36 weeks of the year, while carload traffic grew 2.7 percent.
Diesel prices have climbed 65 percent since February 23, when they averaged $3.809 per gallon, and rose 5.3 percent on a weekly basis. J.B. Hunt’s fuel surcharge programs remain effective at covering higher costs, according to CFO Brad Delco.
“There’s a lot of shippers out there that may use intermodal for 75 percent of the lane, and they use highway for 25 percent, and maybe they tweak that to 90/10 or even 100 percent intermodal,” Darren Field, president of intermodal at J.B. Hunt said.
“If you have low capacity in the trucking space, that means prices are going up, and so people say, ‘Well, I want to use an option. What’s another option for me? So they’re turning to intermodal,” Anne Reinke, president and CEO of the Intermodal Association of North America (IANA) said.
Overall fuel costs have risen substantially since late February, when the war in Iran kicked off and the country’s military forces began disrupting shipping in and out of the Strait of Hormuz. The Strait of Hormuz harbors 20 percent of the world’s oil and natural gas supply.
What we know
U.S. on-highway diesel price reached $6.285 per gallon
J.B. Hunt expects earnings to decline 5‑to‑10 percent sequentially in Q3
J.B. Hunt will incur an additional $10 million in headwinds this quarter
Diesel prices have spiked 65 percent since Feb. 23
Intermodal units increased 4 percent in the first 36 weeks of the year