Oil price spikes hit hardest in low-margin industries

Get ready to go back in time four years, to 2022. Zac Rogers, an associate professor of supply chain management at Colorado State University, said the current oil crisis resembles the oil crisis when Russia invaded Ukraine.

The difference this time, Rogers said, is that the percentage of oil globally impacted by the war in Iran is roughly double that of the 2022 war.

“When Russia invaded Ukraine, that took 10% of all the oil off the board, and it also took a big source of fertilizers off the board. Well, we’re seeing the same thing now, basically the biggest difference being that the Strait of Hormuz being closed, it’s not 10% like it was with Russia and Ukraine; it’s 20% of the oil,” he explained.

According to data from the US Energy Information Administration, Rogers said, in the week of March 9, US diesel costs jumped an average of $0.96 per gallon, to $4.86, “which is the biggest one-week jump in the data” that goes back to 1994.

“And by the way, this week, March 16, it went up another 21 cents—which is the eleventh biggest jump. So two of the 11 biggest jumps in diesel in 30 years have happened in the last two weeks,” he added.

The businesses that will feel the deepest effects, Rogers said, are ones with lower margins that rely on truck freight, like those in the food and grocery industries.

“I think it could spike inflation again,” he said, specifically from supply-driven inflation—that’s right, just like in 2022.

“And if that happens, no matter who the Fed chair is, you would imagine they’re not going to cut interest rates,” Rogers added.

But some companies are brushing off inflationary concerns. General Motors CFO Paul Jacobson said at a Bank of America conference on March 18 that “nothing that we’ve seen in the sales data indicate there’s any concerns” about gas prices affecting car buyers.

Rogers said for companies like GM that have already been deeply affected by tariffs, they are likely just…used to the turmoil, at this point. “So they’re like, ‘All right, yeah, it’s another thing’…GM may be able to absorb a little bit of extra cost.”