Bay Area economic policy nonprofit warns rising diesel prices will affect everyone

By John Ramos

The U.S.-Israeli war with Iran has raised world fuel prices, including right here in the Bay Area. And economists are warning that when the price of diesel goes up, it affects everyone.

The roads around the port of Oakland were jammed with trucks on Monday, moving goods shipped in from all over the world to their destination, and Oakland trucker Manuel Porras just spent $500 to fill his tank. The price per gallon: $6.36.

“It went from $5.49 — Over a dollar!” he said. “You know, it takes the money from my family, because I pay more for the fuel.”

Across the Bay Area, the price for diesel fuel is skyrocketing.  At one Shell station near the Port, the price on Monday was $6.99 per gallon. And Bill Aboudi, Owner of AB Trucking in Oakland, said it won’t just be the truckers paying that bill.  

“We have fuel surcharges built in, but this is completely out of the norm,” he said. “And so, it’s too fast for us to react, but we have to do something, otherwise we’ll be losing money, and we can’t stay in business.”

Aboudi said it will happen quickly.  He says the cost of diesel for delivery trucks and the bunker fuel that powers container ships are going up so fast that even goods already enroute are increasing in cost as they make their way to the US.

“So, it’s a double whammy,” he said. “That customer, thinking he’s going to have $1,000 for the delivery, all of a sudden, it’s going to be $1,200. So, that makes an impact on the cost of goods going to the store shelves.”

And it’s in the stores that the ultimate price will be paid. Jeff Bellisario heads up the Bay Area Council, a nonprofit economic policy advocacy group.

“I do think the inflationary concerns are pretty big here,” he said. “We’ve been seeing inflation come down, and I think, you talk to most economists, and the expectation is that inflation numbers are going to come up in the next few readings.”

He said the Fed already dropped interest rates to reduce inflation, and it had been heading down. But now, with fuel prices rising and a weakening jobs report, there may be no easy way to control it.

“Now we’re at a spot where if inflation is going back up, the Federal Reserve, with monetary policy, we don’t really have the levers to tackle rising inflation and a slowdown in the labor market. So, those two things combined could tilt the US into a recession,” said Bellisario.

There have been suggestions that California suspend its high gas tax during the crisis, but Bellisario said that’s unlikely, given the state’s tough budget situation. He said if the crisis continues, it could lead to new discussions about alternative ways to fund the state’s highway system. He said it will depend on how long fuel prices stay high and how resilient the consumers are.  

But he warned that with the last big inflation spike following COVID, people hadn’t done much spending and had money saved up. This time, they don’t have that cushion.  As for trucker Manuel Porras, he said he and his fellow haulers cannot continue if they can’t pass the cost on to the consumer.

“You know, they are planning to put their trucks out of service,” he said. “Because they cannot afford the price of the fuel.”