Diesel prices have reached record highs as the 2026 Iran war continues, and the ripple effects are already coursing through global supply chains. For trucking companies operating on thin margins, the cost shock is the latest variable in their operations. For shippers, higher fuel costs naturally translate into higher transportation expenses and consumers anticipate potential price increases on goods as a result. However, the impact is not uniform, as some carriers will absorb the blow while others face existential pressure. To understand how these fuel costs move through the supply chain and what comes next, we spoke with Dr. Chris Caplice, founder and director of the MIT FreightLab at the MIT Center for Transportation and Logistics.
Over the past several decades, the trucking industry has developed a sophisticated mechanism to handle fuel volatility. "Fuel prices have been managed separately from linehaul rates for decades," explains Dr. Caplice. "They are exceptionally volatile, so most shippers and carriers use a Fuel Surcharge Program where the risk of fuel costs is shared." These programs assume a baseline fuel efficiency and reimburse carriers accordingly, but the system creates winners and losers. Carriers with newer equipment benefit because their actual fuel efficiency exceeds what the surcharge program assumes. "Carriers with newer equipment will do better, as newer equipment has better fuel efficiency than the FSC program assumes," he notes.
The real pain falls on smaller carriers. "Smaller carriers not only have older equipment and are not getting fully reimbursed, they also have cash flow challenges," Dr. Caplice explains. "FSC is paid in 30+ days while they have to pay for the fuel immediately." For shippers, the mathematics are straightforward: "Every 20 ¢/gallon price increase costs the shipper about 3-4 ¢/mile."
Will companies restructure their supply chains in response? Dr. Caplice is skeptical of dramatic shifts, as, "The price of diesel is highly variable, so we do not see long-term strategy shifts based on temporary price changes. Instead, you see things like shifting to intermodal where it makes sense or increasing truck utilization by filling the truck up completely." As it stands, companies are wary of making irreversible decisions, although one exception may be in acquiring electric trucks. Dr. Caplice notes, "The price increase might place more interest into electric vehicles for class eight trucks,” as sustained high fuel costs would gradually shift the economics of this transformation.
The real vulnerability, however, lies in network resilience. "It impacts smaller carriers much more than larger carriers due to the cash flow challenges. We can expect some bankruptcies since truckload carrier segments have very low barriers to entry and exit," Dr. Caplice warns. Yet the broader freight network has built-in adaptability. "On a macro level it will not have a dramatic effect," he says. When smaller carriers exit, capacity consolidates among larger players, and the network continues functioning.
Looking long-term, when should business leaders start treating this as a genuine crisis rather than a temporary cost shock? "If it stays at this elevated level for the next six months, it might be something to be concerned about," Dr. Caplice advises. "Right now, shippers are doing the best they can by increasing utilization and other efficiency steps."
Learn more about the MIT FreightLab and its work across freight transportation systems and supply chain networks.
