- The war in Iran is inflating diesel prices in the near term.
- The freight picture is mixed but positive for flatbed.
- Rates are stronger year-over-year, but FTR is cautious on its trajectory given current geopolitical uncertainties.
Diesel prices are emerging as a key wildcard for freight forecasts as the U.S.-Iran tensions continue, with analysts noting that its impact will depend on the longevity of price increases.
The weekly national average retail price for on-highway diesel was $4.859 per gallon as of March 9—the largest increase in a week (by nearly 22 cents)—Avery Vise, vice president of trucking at FTR, pointed out.
In terms of cost-per-mile impact, Vise said it rose "nearly 14 cents in a week to more than 69 cents." While there is initial hope that prices might fall back, ongoing volatility makes a meaningful reversal seem unlikely.
“We’re looking at an extended period of time, probably, where diesel prices are substantially higher than they were three weeks ago,” Vise said.
In 2022, a diesel price spike occurred as well, Vise pointed out. Spot rates had already peaked and were declining, leading to a big increase in carrier revocations. Large carriers were aggressively recruiting drivers, manufacturing output was already declining, and real consumer goods spending had stopped growing.
The result: “That fuel price surge actually triggered all the things that combined to create the glut in capacity versus freight that led to essentially the freight rate recession that we’ve had now,” he said.
Today’s environment is different, he noted. Spot rates are rising (with a strong recovery in late November), and carrier revocations are trending down, while carriers are reducing workforces. Manufacturing has been recovering, and real goods spending has grown, though not at the same levels as 2022.
A diesel spike with recovering fundamentals is inflationary for freight rates, Vise said.
“Rather than actually creating a deflationary environment for rates, it’s probably going to be the opposite in this case—although it was already going to be a firming market,” he said.
Looking at economic conditions, Vise said manufacturing has been recovering, with new orders cited as positive. Consumer spending growth is concentrated in areas with little freight impact, dominated by computers, software, and digital downloads; meanwhile, non-durable growth is heavily concentrated in pharmaceuticals. Vise described the overall consumer sector as “sluggish.”
Housing starts showed recent strength but remain historically restrained.
“Construction is running stronger than it was heading into the pandemic... but that also means we’re not getting any growth out of that,” Vise said.
In nonresidential construction, data center construction is a bright spot, especially for the flatbed market, Vise said. In November, it exceeded general office construction for the first time.
“That’s probably going to continue for a while,” he noted.
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Spot and contract rate trends
Dry van spot rates have been recovering since around Thanksgiving last year, Vise said. The trajectory from the new year was slightly seasonal, with weather events pushing rates sharply higher; they then moved as seasonally expected from that elevated point. Currently, rates are up 19% year over year.
Refrigerated spot rates had a similar reset, pushed up by weather events, and are now up approximately 27%. Flatbed has been more consistent, up about 14% year over year—its strongest performance in roughly four years. Vise said that is because of sustained demand from data center construction and the manufacturing recovery, with no near-term reason to expect the trend to reverse.
Contract rates are also recovering steadily, with the year-over-year rate of change accelerating, though the forecast remains cautious.
“We just basically said spot rates have recovered. We’re going to assume sort of a straight-lining of that recovery," Vise said.
Capacity and truck orders
Following a BLS benchmark revision to employment data, trucking payroll jobs are at their lowest level since September 2020, Vise pointed out. For truckload specifically, the revision shows employment at its lowest level since February 2014.
FTR estimates that the active carrier population has reached or is near its cyclical bottom.
“Essentially, we think that this is the bottom of where we’re going to be... sort of flattening out for a few quarters as carriers kind of adjust to a stronger environment, and then improving freight volumes, bringing that capacity back up," Vise said.
The strong spot rate recovery in November and December also brought a nearly 20% spike in applications for new transportation and warehousing businesses, according to Census Bureau data, Vise said. Though the spike came down in February, it remained elevated relative to prior months.
Class 8 truck orders, which have shown strong improvement, surged for several reasons, Vise said. Pent-up demand and tariff clarity on heavy trucks helped fleets who were holding off on equipment purchases.
Uncertainty around emissions regulations (specifically the NOx rule) had also frozen purchase decisions, Vise added. Once the U.S. Environmental Protection Agency signaled that NOx technology requirements would remain but that extended warranty obligations would be modified, regulations were clear enough for fleets to proceed.
Vise questioned whether March’s truck order figures would sustain February’s strength, given the Middle East conflict. However, he said year-over-year comparisons will remain favorable through at least April, as that period last year was extremely weak.
