Shippers often face the challenge of unpredictable diesel fuel costs, which can disrupt budgets and create financial uncertainty. Relying on traditional fuel surcharge programs only magnifies this problem, as they fail to capture the real-time dynamics of the diesel market.

The key is understanding the market fundamentals driving fuel price fluctuations and leveraging a market-based fuel reimbursement program to make fuel a pass-through expense. By analyzing factors like supply and demand fundamentals, transportation leaders can have informed conversations with their C-suite , clearly explaining the impacts on transportation budgets and advocating for smarter, more efficient strategies that protect their bottom line.

Key takeaways

Freight Demand is a Major Driver: Seasonal shifts in freight demand, such as the holiday peak season, can significantly tighten diesel supply and cause price spikes.
Refinery Operations Impact Supply: The operational status of refineries, including scheduled maintenance seasons and utilization rates, directly influences the amount of diesel available in the market.
Market Fundamentals Over Noise: Core supply and demand fundamentals, along with the price of crude oil, often have a greater impact on diesel prices than day-to-day geopolitical events.
A Market-Based Approach is Key: To manage volatility effectively, shippers should adopt a fuel reimbursement strategy that reflects the actual, lane-level cost of fuel rather than relying on national averages.

What drove diesel market volatility in late 2025?

After a period of moderate price volatility in the summer and early fall of 2025, the diesel market saw a significant spike in late October and early November. This increase was not caused by a single event but rather a convergence of three key factors:

Surging Freight Demand: The lead-up to the holiday season created a surge in demand for freight transportation, increasing the immediate need for diesel fuel across the country.
Increased Diesel Exports: During this same period, demand for diesel from European countries rose, leading to higher export volumes from the U.S.
Refinery Maintenance Season: Many U.S. refineries undergo scheduled maintenance in the fall. This temporarily reduces their output, which tightened diesel fuel inventories just as demand was peaking.

This combination of high demand and constrained supply put significant upward pressure on diesel prices, highlighting how interconnected supply chain activities and energy markets truly are. A deeper understanding of these market shifts reveals that elevated U.S. crude oil production has brought greater price stability and resilience to global supply disruptions. Increased domestic output not only helps offset international market volatility but also supports a more robust transportation network by reducing dependence on foreign sources. This dynamic was particularly evident during recent periods of heightened demand and constrained refinery capacity, as strong U.S. production played a crucial role in tempering price spikes and ensuring supply reliability for shippers.

Why did diesel prices decrease in December 2025 and January 2026?

As the calendar turned to December, the price pressure began to ease. Data from the U.S. Energy Information Administration (EIA) shows the national average on-highway diesel price fell from $3.54 per gallon in late December to $3.48 per gallon in the first week of January. This downward trend was driven by a reversal of the factors seen in the fall.

First, freight demand began to wane as the holiday peak subsided. Second, refineries started coming back online after completing their maintenance. Refinery utilization rates climbed to an average of 94%, allowing for consistent, week-over-week builds in diesel inventories. This increase in supply, coupled with softer demand, allowed prices to stabilize and decline.

Regional tax policies also play a significant role in shaping fleet costs. For a detailed look at how state-by-state fuel taxes impact transportation budgeting and strategy, Breakthrough’s recent analysis highlights the substantial differences in diesel fuel taxes across states, illustrating how these variations directly impact overall transportation costs and budgeting for shippers. By understanding these tax structures, organizations gain a clear advantage in making strategic decisions that help optimize spend and align with broader network objectives.

How do geopolitics and crude oil affect the diesel market?

While geopolitical events can introduce uncertainty, their impact on the diesel market is often less direct than many assume. For example, despite geopolitical risks concerning Venezuela in January, diesel price volatility remained relatively subdued.

The reason is that market fundamentals remained stable. Crude oil prices, which account for approximately 50% of the cost of diesel, were flat. At the same time, refinery margins—the difference between the cost of crude oil and the wholesale price of diesel—held steady, making up another 20–25% of the total cost. This demonstrates that while global events are important to monitor, the core drivers of diesel prices are often rooted in the tangible supply and demand dynamics of crude oil and refined products. For shippers, this underscores the importance of a transparent fuel reimbursement strategy that can navigate these complexities.

For ongoing market updates and further insights into diesel market dynamics, view our latest articles and consider subscribing for timely analysis.

Diesel market fundamentals outweigh headlines

The fluctuations in the diesel market during late 2025 and early 2026 serve as a clear reminder of how sensitive prices are to shifts in freight demand and refinery operations. While geopolitical news can create headlines and volatility in the market, the underlying fundamentals of supply and demand are what ultimately dictate the price shippers pay.

Relying on outdated national average fuel surcharges in such a dynamic environment leads to inaccurate reimbursements and unnecessary costs. To gain control over this volatile expense, industry-leading shippers are turning to a market-based approach. By leveraging real-time, lane-level data, a solution like Breakthrough’s Fuel Recovery program ensures you pay a fair and accurate price for fuel on every movement, turning a volatile cost center into a strategic advantage.

Frequently asked questions about the diesel market

Are diesel prices going up or down?

Diesel prices are constantly changing based on supply, demand, crude oil costs, and refinery operations. While prices decreased in early 2026, the market remains volatile. The best approach is to monitor market fundamentals rather than trying to predict a single direction.

What is the biggest factor influencing the diesel market?

While many factors play a role, the price of crude oil is the largest component, making up about 50% of the cost. Beyond that, the supply and demand balance, which is heavily influenced by freight activity and refinery production levels, is the most significant driver of price changes.

How can shippers protect themselves from diesel price volatility?

The most effective way shippers can protect themselves from diesel fuel price volatility is to hedge. With Breakthrough’s T-Fuel solution, companies can lock in a fixed price for the fuel consumed while moving products to market. This data-driven approach not only helps mitigate the risks associated with fluctuating fuel prices but also ensures accurate budgeting and cost forecasting.

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