Higher oil prices are already affecting American businesses : NPR

Gasoline prices have jumped about a dollar a gallon since the war with Iran began. And diesel prices are up even more. That’s tough on truckers, fishermen, and just about everyone else.

SCOTT DETROW, HOST:
Oil prices rose again today as the U.S. war with Iran continues to disrupt global energy supplies. The world benchmark for oil is trading above $100 a barrel, and gasoline prices in the U.S. have jumped to an average of just under $4 a gallon. These are some of the most visible effects of the war so far. But there’s likely to be broader economic fallout. In a moment, we will hear from some people whose jobs are already showing the strain of these higher fuel prices. First, though, we will get an overview from NPR’s Scott Horsley. Mr. Horsley, thanks for joining us.
SCOTT HORSLEY, BYLINE: Good to be with you.
DETROW: Iran has allowed just a few vessels to transit the Strait of Hormuz, but energy traffic in that area is just largely cut off. So what is that doing to prices?
HORSLEY: We’ve seen some big swings in prices over the last week as oil traders try to assess how long this might go on. Prices fell early in the week after President Trump hinted at a possible settlement, but that relief turned out to be short-lived. And today, oil prices are back up again, although not as high as they had been. Brent crude, as you mentioned, is just over $100 a barrel. At the gas pump, prices have jumped about $1 a gallon since the war began. Diesel prices are up even more, about $1.60 a gallon. And all of this reflects a genuine supply crunch, not only for oil but also for natural gas and fertilizer, as those shipments in the Middle East have really been disrupted by the war.
DETROW: And these are all things that factor into the prices of so many other things. So like, what’s the best way to think about the broader impact of all of this on the U.S. economy?
HORSLEY: Well, it’s not good. The more money people have to spend on gas, the less they have to spend on everything else that they want to buy. And the rise in diesel prices is ultimately going to mean higher costs for everything that has to be trucked around the country or travels by train, which is pretty much everything. Even before the war started, inflation had been inching up and economic growth had been slowing down, and the war’s likely to make both those headwinds worse. How much is hard to say.
As Federal Reserve Chairman Jerome Powell said last week, nobody knows. A lot is going to depend on how long this goes on. But the Organisation for Economic Co-operation and Development projects this will push U.S. inflation back above 4% this year, not nearly as high as we saw in 2022 but not the direction anyone wants to see at a time when people are already frustrated about the cost of living. You know, wartime inflation will make it harder for the Federal Reserve to cut interest rates, and Freddie Mac said today, mortgage rates, which had briefly dipped below 6%, are now back up around 6.4%, so that’s not going to help with the sluggish housing market.
DETROW: So that is the big-picture economic view. And, Scott, I want you to stick with me for a few minutes because I want to hear how this is playing out throughout the economy, how it’s affecting people’s jobs. And I want to start with the view of someone who is watching this from the wheel of a tractor trailer.
MONTE WIEDERHOLD: Owning a truck, fuel is your biggest cost. It was pretty much sticker shock when you were paying 3.89 a gallon or whatever, and then you come out a weekend later, and it’s almost $5. Trucking is a penny business. My dad taught me that, that – he said, you take care of the pennies, son, the dollars will take care of themselves.
DETROW: That’s Monte Wiederhold who owns a small truck fleet in Ohio called B. L. Reever Transport. He’s been trucking for almost 50 years. His fleet moves products around the Midwest. Their long hauls average 300 miles.
WIEDERHOLD: Small business truckers, we make up about 96% of the fleets in the United States. So it makes it hard for the little guys to make the adjustments that the big guys can do because we don’t, monthly (ph), have the leverage.
DETROW: Wiederhold says his company is always looking for ways to keep the costs down.
WIEDERHOLD: We’ve always tried to eliminate idling. Instead of leaving the truck idle for 10 minutes or whatever while you’re checking in, you shut the truck off. By maybe driving a little bit slower – those little things like that can help you save some money.
DETROW: He says he has faced a lot of highs and a lot of lows in his five decades in the trucking business and feels like he can probably get through this moment, but he is worried about what will happen if gas prices get much higher and stay there.
WIEDERHOLD: I heard the other day, out in Connecticut, there was a truck stop that was charging $8.31 a gallon for fuel. If that fuel goes to that level and stays there for an extended period of time, our economy, our country is going to be in a real hurt, I think.
DETROW: Wiederhold feels like no matter what business you are in, increases in energy costs will trickle down to everyone.
WIEDERHOLD: We’re all consumers, so in the end, we’re all going to pay for this. We’re all going to feel it.
DETROW: Justin Madeira agrees that everybody is going to feel the hit if oil prices stay high. And at the same time, though, he is confident it won’t get to that.
JUSTIN MADEIRA: I’m very confident that the business acumen of someone like Donald Trump is well aware of this and he’s not going to let this get prolonged.
DETROW: Justin and his brother, Travis Madeira, are fourth-generation lobster fishermen. They are the owners of Lobster Boys, a lobster wholesale business based on Long Island. Their company has an e-commerce website that sells lobsters domestically and internationally, sourcing their lobsters directly from Canadian fishermen. Fuel plays a role in all parts of their business. Travis says the fishermen he talks to are concerned about fuel costs.
TRAVIS MADEIRA: These guys, you know, they’re buying a thousand gallons, probably, like, minimum to, you know, fuel in their boats, so it’s a lot when it all adds up.
DETROW: And then there’s the cost of distribution.
T MADEIRA: All our lobsters come down from Canada, down to our U.S. facility on long-haul trucks, whether it’s our internal truck or an outside trucker, you know, company that we hired. So the cost of that – they’ve tried to raise our rates. Our fuel rates have gone up and then, you know, jet fuel if we’re using outside airlines.
DETROW: Another important factor for the company, lobsters aren’t necessarily a need, so demand could go down if families don’t have the extra money to treat themselves to lobster in the coming months.
J MADEIRA: ‘Cause this happens in our industry. Like, it’s a seasonal business, so it’s a double whammy on a product like ours.
DETROW: Justin and Travis Madeira say they’re going to have to eat the cost themselves if fuel prices don’t go down, but they do feel confident that this is a short-term issue.
J MADEIRA: Unless this is somehow, over the next couple of weeks, not resolved in a significant way, that the traffic through the Strait of Hormuz is opened up, then we’re just going to maintain normal operations and eat the cost. Everyone’s going to eat it, including FedEx, including us, including the fishermen, because we all believe that this is short-term.
DETROW: Scott Horsley, you’ve been listening to this. The thing I want to eat right now is lobster.
HORSLEY: (Laughter).
DETROW: But let’s push past that. And you’re hearing some confidence there that the economic pain of this war won’t necessarily stick around very long. How realistic is that view?
HORSLEY: Well, let’s hope the Lobster Boys are right. I will say the U.S. economy has withstood a lot of shocks in recent years and has generally held up better than a lot of forecasters might have expected. We do have some things going for us. For one, the overall economy is much more energy efficient than it once was. You know, the average family spends only about 2% of its budget on gasoline. We were spending about 2 1/2 times that share back in 1979, at the time of the Iranian revolution. That said, the longer fuel prices stay elevated, the more we’re going to feel those ripple effects on the cost of everything else.
DETROW: Let’s say there is an agreement. The war ends this week, right? How long would it take for prices to start to come down?
HORSLEY: You know, energy prices tend to go up quickly when supplies are disrupted and then take their time in coming down. Even when the Strait of Hormuz is reopened to normal traffic, it’s going to take time to repair some of the damaged infrastructure, to reopen wells that have been shut in. We heard Justin Madeira say he’s confident the president’s business acumen will lead him to end this war quickly. Certainly, Trump would seem to have every incentive to do so to help his own political standing, but, you know, the Iranians also have a say. So while it was the president’s choice to start this war, it may not be entirely up to him to decide when it ends.
DETROW: That is NPR’s Scott Horsley. Scott, do you want to give your home address for the lobster delivery, or can we do that later?
HORSLEY: (Laughter) I’ll start the fire.
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