2 hours ago
The Escalating Cost of Diesel and Its Ripple Effects
In the spring of 2022, diesel prices surged across North America, with some regions reporting rates exceeding $7 per gallon. In Ottawa, for example, diesel reached $2.45 per liter—over $7 USD per gallon—forcing contractors to implement fuel surcharges and reevaluate project budgets. In the U.S., prices hovered around $5.75 per gallon, up from $4.75 just weeks prior. These increases were not isolated spikes but part of a broader inflationary trend affecting every aspect of the construction and logistics industries.
Fuel is not just a line item—it’s the lifeblood of heavy equipment operations. Excavators, loaders, cranes, and haul trucks consume gallons per hour, and when diesel climbs past $5, the math becomes unsustainable. For instance, a mid-size excavator burning 5 gallons per hour would incur an additional $25 per hour in fuel costs if diesel rose from $3 to $8. This forces operators to either absorb the cost, raise rates, or reduce usage—all of which have cascading consequences.
Surcharges and Rate Adjustments Across the Industry
To cope with rising fuel costs, many contractors began implementing hourly fuel surcharges. One operator added $5 per hour when diesel hit $3, $10 at $4, and $15 at $5. Others raised base rates by $15 to $20 per hour across the board to preempt inflation. These adjustments, while necessary, only work if clients accept them. In some cases, contractors honored previous quotes despite the spike, absorbing losses to maintain relationships.
Fleet operators faced even steeper challenges. A 57-truck fleet in Washington saw its monthly fuel bill increase by $225,000. This kind of jump can destabilize even well-capitalized businesses, especially when payment cycles slow and clients delay invoices. Some companies halted equipment purchases and expansion plans, focusing instead on niche jobs and debt reduction.
The Psychological Threshold and Market Sentiment
Beyond the numbers lies a deeper question: when does the public say “enough”? Infrastructure work—roads, water, sewer—must continue, but discretionary projects like landscaping, private development, and custom builds are vulnerable. Contractors began asking themselves whether to invest in new machines or hold back, fearing a sudden drop in demand.
The uncertainty was compounded by rising interest rates and a cooling housing market. Some operators anticipated a slowdown by summer, citing delayed concrete deliveries and erratic scheduling. Others noted that while revenue was high, profit margins were shrinking—record income paired with record expenses.
Economic Theory and Labor Dynamics
An old economic theory suggests that unemployment below 5% can trigger inflation, as workers jump jobs for higher wages and businesses compete to retain staff. In 2022, this dynamic played out as labor shortages drove up wages, further inflating costs. Younger workers, unfamiliar with recessions, assumed prices would never fall and that better-paying jobs were always available. This mindset left them unprepared for slow quarters or economic corrections.
Veteran operators, having lived through downturns, recognized the warning signs. They began prioritizing cash flow, reducing debt, and preparing for leaner times. Some compared the moment to the lead-up to the Great Recession, noting that while fuel prices were the visible symptom, the deeper illness was systemic imbalance.
Conclusion
Fuel prices are more than a financial metric—they’re a stress test for the entire heavy equipment ecosystem. As costs rise, businesses must adapt through surcharges, rate hikes, and strategic restraint. But the real tipping point may come not from the pump, but from the market’s ability to absorb those costs. When clients stop calling and projects stall, the industry will know it has reached its limit. Until then, operators must balance growth with caution, hoping to stay ahead of the curve without falling off it.
In the spring of 2022, diesel prices surged across North America, with some regions reporting rates exceeding $7 per gallon. In Ottawa, for example, diesel reached $2.45 per liter—over $7 USD per gallon—forcing contractors to implement fuel surcharges and reevaluate project budgets. In the U.S., prices hovered around $5.75 per gallon, up from $4.75 just weeks prior. These increases were not isolated spikes but part of a broader inflationary trend affecting every aspect of the construction and logistics industries.
Fuel is not just a line item—it’s the lifeblood of heavy equipment operations. Excavators, loaders, cranes, and haul trucks consume gallons per hour, and when diesel climbs past $5, the math becomes unsustainable. For instance, a mid-size excavator burning 5 gallons per hour would incur an additional $25 per hour in fuel costs if diesel rose from $3 to $8. This forces operators to either absorb the cost, raise rates, or reduce usage—all of which have cascading consequences.
Surcharges and Rate Adjustments Across the Industry
To cope with rising fuel costs, many contractors began implementing hourly fuel surcharges. One operator added $5 per hour when diesel hit $3, $10 at $4, and $15 at $5. Others raised base rates by $15 to $20 per hour across the board to preempt inflation. These adjustments, while necessary, only work if clients accept them. In some cases, contractors honored previous quotes despite the spike, absorbing losses to maintain relationships.
Fleet operators faced even steeper challenges. A 57-truck fleet in Washington saw its monthly fuel bill increase by $225,000. This kind of jump can destabilize even well-capitalized businesses, especially when payment cycles slow and clients delay invoices. Some companies halted equipment purchases and expansion plans, focusing instead on niche jobs and debt reduction.
The Psychological Threshold and Market Sentiment
Beyond the numbers lies a deeper question: when does the public say “enough”? Infrastructure work—roads, water, sewer—must continue, but discretionary projects like landscaping, private development, and custom builds are vulnerable. Contractors began asking themselves whether to invest in new machines or hold back, fearing a sudden drop in demand.
The uncertainty was compounded by rising interest rates and a cooling housing market. Some operators anticipated a slowdown by summer, citing delayed concrete deliveries and erratic scheduling. Others noted that while revenue was high, profit margins were shrinking—record income paired with record expenses.
Economic Theory and Labor Dynamics
An old economic theory suggests that unemployment below 5% can trigger inflation, as workers jump jobs for higher wages and businesses compete to retain staff. In 2022, this dynamic played out as labor shortages drove up wages, further inflating costs. Younger workers, unfamiliar with recessions, assumed prices would never fall and that better-paying jobs were always available. This mindset left them unprepared for slow quarters or economic corrections.
Veteran operators, having lived through downturns, recognized the warning signs. They began prioritizing cash flow, reducing debt, and preparing for leaner times. Some compared the moment to the lead-up to the Great Recession, noting that while fuel prices were the visible symptom, the deeper illness was systemic imbalance.
Conclusion
Fuel prices are more than a financial metric—they’re a stress test for the entire heavy equipment ecosystem. As costs rise, businesses must adapt through surcharges, rate hikes, and strategic restraint. But the real tipping point may come not from the pump, but from the market’s ability to absorb those costs. When clients stop calling and projects stall, the industry will know it has reached its limit. Until then, operators must balance growth with caution, hoping to stay ahead of the curve without falling off it.
