Diesel near record highs: why the Russia supply deal and red-dye order won't bring fuel surcharges down soon

The details

Prices. The DOE/EIA average retail diesel price was $6.179 a gallon effective Oct. 12, down 2 cents, the third straight weekly decline. AAA’s daily average fell for 17 days from Sept. 22 but rose 3.3 cents in the two days to Oct. 14, to $6.2997. Diesel set an all-time record above $6.50 in September before easing only modestly.

The Russia deal. On Oct. 9, President Trump said Russia would supply more than 300,000 metric tons of diesel immediately, about 2.2 million barrels, with 500,000 tonnes in November and 1 million tonnes after that. Treasury issued a sanctions waiver allowing the sale and import of Russian diesel through April 7, 2027. For scale, U.S. non-jet distillate demand runs about 3.65 million barrels a day.

Analysts doubt the volumes will show up or matter. S&P Global Energy CERA estimates Russia has exported only 100,000 to 150,000 barrels a day of diesel in recent months, with roughly half its refining capacity offline after Ukrainian attacks. Rachel Ziemba of Horizon Engage said the October and November volumes look like recent exports, and that scaling up would require refinery repairs and an energy ceasefire. “The amount of diesel Russia can provide would be a drop in the bucket compared to global demand,” Masha Kotkin of the Center for Strategic and International Studies told S&P Global. ULSD futures rose after the announcement.

Legal hurdles. A bipartisan group of six senators led by Sen. Jeanne Shaheen said Congress banned Russian energy imports in 2022 and that the administration did not consult Congress as the law requires. Ellen Wald of Transversal Consulting said the ban can be lifted only after the president shows Congress evidence of a Russia–Ukraine agreement to withdraw forces, followed by a 90-day wait, so Russian diesel could not legally enter the U.S. in October or November without new legislation.

The red-dye order. An executive order published Oct. 9 directs Treasury to consider deferring federal excise tax obligations and waiving penalties for red-dye diesel used on roads, with a proposed deferral from Oct. 5 to Dec. 31. Many states prohibit dyed diesel on their roads, and wholesale and retail networks rarely keep it separate. Breakthrough Fuel rated the retail price effect as low.

Other factors. Strategic stock releases by G7 and IEA members, continuing drone strikes on Russian refineries, talk of a possible U.S. export ban and uncertainty about flows through the Strait of Hormuz all add to volatility.

Freight demand is not the driver. FreightWaves’ Craig Fuller described diesel as dropping “a little bit, but not much” in October, with “not a whole lot of relief.” He said truckload volumes have softened compared with recent years, partly because of weaker food and beverage freight, which he linked to inflation, reduced SNAP benefits and GLP-1 medications, and partly because of shifts in data center freight. Citing Arrive Logistics, he said capacity and the supply-demand balance, not demand, are setting the market. That means fuel costs are landing on a freight market where carriers already have pricing power, so surcharges are unlikely to be absorbed.

What it means for your surcharges

Most truckload fuel surcharges follow a simple formula: the weekly DOE/EIA price minus a base price, divided by an assumed fuel economy. The table below uses a $1.25 base and 6.5 miles per gallon, common contract assumptions. Your contracts may differ.

By our calculation, every 10-cent move in diesel changes the surcharge by about 1.5 cents a mile under these assumptions. That is why the surcharge table, not the headline price, decides what you pay.

Why two carriers can bill very different fuel at the same diesel price

The base price and fuel economy written into a surcharge table matter as much as the diesel price itself. At the Oct. 12 price of $6.18 a gallon:

These are our calculations. The spread between the highest and lowest table is about $161,000 a year on the same freight at the same fuel price. Normalizing base and fuel economy in your bid lets you compare carriers fairly, and lets you see which carriers are earning margin through the surcharge rather than the linehaul rate.

LTL and parcel work differently. Less-than-truckload carriers and parcel carriers typically apply fuel surcharges as a percentage of the freight charge, set from a weekly table tied to the same DOE/EIA index. A percentage surcharge grows with every general rate increase, so check both the table and the base it applies to. See our fuel surcharge guide.

Building a 2027 fuel budget

1. Start from your miles or freight spend by mode, not last year’s surcharge total.
2. Pick a base case near current prices, given that analysts expect refining constraints and the war with Iran to keep distillates tight into 2027.
3. Add a volatility band. September’s record above $6.50 and the spring swings show how far diesel moves within a quarter.
4. Apply each carrier’s actual surcharge table to the base case and the band.
5. Revisit quarterly against weekly EIA prices.

This is our method, and it works for any mode where the surcharge follows a published index.

What procurement teams should do

• Index fuel surcharges. Tie carrier fuel surcharges to the weekly DOE/EIA diesel price with a published table, and audit invoices against it.
• Standardize base and fuel economy. Different base prices and mpg assumptions across carriers make bids hard to compare. Normalize them in your RFP.
• Budget for elevated fuel. Plan 2027 freight budgets with a fuel scenario near current levels and a volatility buffer, not a return to 2025 prices.
• Reduce fuel exposure. Consolidate shipments, raise load factors and evaluate intermodal on long lanes, where road-to-rail conversion has accelerated as fuel prices surged.
• Don’t count on red-dye savings. Interstate carriers face state-by-state rules and compliance costs that likely outweigh the tax deferral.

What to watch next

• Weekly EIA prices. Three straight weekly declines could reverse; AAA’s daily average already ticked up in mid-October.
• Russian volumes and the legal fight. Watch whether Congress challenges the waiver and whether November volumes actually reach the market.
• Winter demand. Heating oil season adds pressure on distillates from November, which typically supports diesel prices.

The bigger picture

Diesel is being driven by global supply disruptions and refining constraints, not by policy announcements. Analysts say only a lasting energy ceasefire that lets Russia repair refineries would change the picture, and that would take many months. Procurement teams should assume volatility and manage it through contract structure. See the diesel reading in our Cost Pressure Monitor and the truckload rate outlook.