The latest round of soaring fuel prices is more difficult to bear than the earlier surge this year, as both businesses and consumers have weaker capacity to absorb the impact. Moreover, the latest price data indicates that inflation is continuing to spread beyond the energy sector.

Despite the recent resurgence in tensions in the Iran war, crude oil prices have slightly declined. However, restrictions on the refining process continue to keep the costs of gasoline and diesel at high levels. Data from the American Automobile Association ( AAA ) shows that on Wednesday, the average price of diesel reached $6.30 per gallon, an increase of about 68% since the outbreak of the Iran war. Since diesel is a crucial fuel for industries such as manufacturing, agriculture, and transportation, its soaring prices have affected multiple sectors.

The Consumer Price Index (CPI) from the U.S. Department of Labor shows that the core inflation rate rose from 2.4% in August to 2.6% in September, indicating that businesses are passing on more of their costs to consumers. Meanwhile, retail sales reports indicate that core consumption, excluding gas stations, only increased by 0.2%, suggesting that fuel costs are putting greater pressure on household spending.

These trends are also corroborated by the Federal Reserve's latest Beige Book survey on business and economic conditions. The report is filled with warning signs regarding rising fuel prices across the country.

The brown paper shows that not only are there more fuel surcharges at all stages of the supply chain, but profit margins are also being squeezed, and consumers are reducing their spending due to the increased cost of refueling.

The New York Fed stated that a food manufacturer mentioned having never seen such widespread inflationary pressures since the outbreak of the pandemic. The San Francisco Fed noted that a manufacturer complained that every type of material purchased in recent weeks came with a freight surcharge.

The Federal Reserve of Boston pointed out that existing trucking contracts have helped to control agricultural product prices, but when these contracts are renegotiated, costs may surge. The Federal Reserve of Philadelphia noted that after some hedging tools expire, the mechanisms that previously helped to stabilize costs disappear, allowing manufacturers to gain more pricing power and pass on the increased costs to others.

The Cleveland Federal Reserve stated in its褐皮书: "Higher fuel costs remain the main driving factor, and several contacts pointed out that these costs are being passed on to freight rates, packaging, and petroleum-based materials." The Fed also added that a builder described high fuel costs and tariffs as a "double blow."

Consumer spending in the Cleveland Federal Reserve district stabilized after four consecutive periods of decline, with retailers in multiple industries attributing the slowdown in activity to high fuel prices. Not all districts saw a decline: most areas reported little change in overall consumer spending, while the Richmond Federal Reserve stated that local spending showed a modest increase.

Although trucking companies have increased their fees, they are also trying to absorb the rising costs themselves. The Richmond Federal Reserve stated that when diesel prices rise while companies have previously locked in contract freight rates, it is difficult for carriers to make a profit. In order to cover the increased costs out of their own pockets, trucking companies have resorted to using their savings, shifting expenditures from maintenance to other purposes, or pausing the purchase of more fuel-efficient trucks.

Another company surveyed by the Richmond Federal Reserve described how higher fuel prices completely disrupted their cost structure.

The Brown Book states: "A regional chain of grocery stores noted that with diesel prices rising by 30% compared to last year, the cost of transporting a head of lettuce from California to their stores has now exceeded the price of the lettuce itself." The grocer also mentioned that consumers are extremely sensitive to prices and that they are unable to pass on these continuously rising transportation costs.

The volatility of fuel costs is also a problem. According to a report from the Minneapolis Federal Reserve, a lumber company in Montana stated that fuel costs had more than doubled in a project contract signed a few months prior.

The Federal Reserve Bank of Kansas City stated that higher diesel costs have forced suppliers, distributors, and customers to renegotiate contract terms in order to protect their profits, while most businesses in its jurisdiction expect that demand will further weaken if fuel prices remain high.

Some jurisdictions have also reported signs of tight supply. The Federal Reserve Bank of Kansas City stated that several contacts in rural areas of Colorado reported that in recent weeks, diesel supply at gas stations has been intermittent, leading some buyers to receive fuel deliveries in advance to ensure they could get it.

The additional expenditure on fuel is also being transmitted to the labor market, with employees demanding higher wages, which could further drive up inflation through a wage-price spiral.

The Cleveland Federal Reserve reported that due to rising living costs, particularly increases in gasoline and electricity prices, several companies in its jurisdiction have granted salary raises. Contacts from the San Francisco Federal Reserve also mentioned that employees requested and partially received raises to offset the higher costs of fuel and food.

The Dallas Fed stated: "Rising diesel prices are the dominant factor driving up costs, being frequently mentioned. They have affected freight, agriculture, and aviation prices, and have caused widespread compression of profit margins across many industries."

Despite consumers showing an unexpectedly strong resilience in the face of President Trump's war against Iran and tariffs, they have lost an important buffer.

This spring, when gasoline prices soared following the outbreak of war in Iran, Americans began to receive larger tax refunds from last year's One Big Beautiful Bill Act. However, now that the war has entered its eighth month with no sign of ending, gasoline prices have skyrocketed again, and consumers no longer have that buffer to rely on.

Michael Pearce, the chief economist for the United States at the Oxford Institute for Economics and Finance ( Michael Pearce ), wrote in a report on Thursday: “Higher oil prices are beginning to truly affect consumption, as there is no fiscal policy in place to offset them this time, unlike earlier this year. We estimate that the cumulative amount of additional spending on gasoline so far this year has already exceeded the boost brought about by last year’s tax refunds.”