Diesel Costs Could Sink Trucking Capacity This Quarter—Here’s Why
Spot rates soar 40% year-on-year, but carrier margins remain squeezed by fuel costs, warns RXO’s pricing chief.
Diesel prices are poised to become the freight market’s defining story this quarter, with rising fuel costs threatening to push more trucking capacity out of the sector even as spot rates soar. Corey Klujsza, VP of Pricing and Procurement at RXO, warns that carrier profitability remains precariously low despite a 40 to 42% year-on-year surge in linehaul rates, leaving the market vulnerable to further volatility.
Klujsza told FreightWaves that while spot rates briefly flirted with all-time highs around the Fourth of July, the rally has since cooled, partly due to shippers re-rating contract lanes through mini-bids. This shift has pulled volume away from the spot market without signalling a collapse in demand, yet.
However, the underlying consumer demand picture is far from robust. Klujsza argued that recent goods-spending data is misleading, as much of the apparent rebound is driven by surging energy costs rather than a genuine uptick in consumer purchases. Strip out fuel, he said, and the freight demand landscape looks decidedly weaker.
Silver
The gap between soaring spot rates and stagnant carrier margins is stark. While linehaul rates are up more than 40 to 42% year-on-year, Klujsza noted that the average carrier’s operating margin remains “nowhere close” to levels seen during the last upcycle. The culprit? Diesel. “All-in transportation spend is inching closer to all-time highs,” he said, “but really, again, we’re contributing and attributing a lot of that to the diesel cost.”
“The linehaul yield for the average carrier in the market is really nowhere close to what it was in the past cycle. Now, all-in transportation spend is inching closer to all-time highs, but really, again, we’re contributing and attributing a lot of that to the diesel cost.”
Corey Klujsza·VP of Pricing and Procurement at RXO
Cass Freight Shipment Index Index offered a rare glimmer of hope in August, posting its first year-over-year positive print in roughly 40 to 42 to 42 months. Klujsza highlighted the significance of this data point, noting that it measures volume falling to the for-hire market, a potential sign that shippers are being forced to rely more on brokers and spot carriers as dedicated and private fleets reach capacity. However, this silver lining comes with a caveat: the shift could exacerbate rate volatility if diesel costs continue to climb.
Contract Rates Set for Double-Digit Hikes in 2027: diesel costs
The contract market is also undergoing a reckoning. Shippers that locked in underpriced lanes in the first half of the year are now being forced to reset rates, narrowing the premium that spot rates traditionally hold over contract rates. “Single digits really won’t cut it going into 2027,” he said, “given the timing of the last procurement event.".
“Single digits really won’t cut it going into 2027, given the timing of the last procurement event.”
Corey Klujsza·VP of Pricing and Procurement at RXO
Beyond rate adjustments, shippers are also tightening their carrier and broker networks in response to heightened fraud and compliance risks.
The pace of spot rate acceleration seen from Q2 into Q3 may be largely behind the market, but inflationary pressures, particularly from diesel, are expected to persist. With carrier margins still under pressure and consumer demand showing signs of weakness, the fourth quarter could see more trucks idled, further tightening capacity and pushing rates higher.
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