Farmers work on notoriously tight profit margins and the high cost to fuel their equipment is another layer of budgeting they have to think about this planting season.
About 20% of the world’s daily oil supply passes through the Strait of Hormuz off the coast of Iran. In retaliation to the U.S. strikes in the Middle East, the Iranian Regime has threatened to attack any vessels that cross the strait.
The deadlock means higher gas prices globally, including in the U.S.
Farmers are getting ready for spring planting season, one of their most energy-dependent times of year. Will Hutchinson, a Middle Tennessee farmer, said the timing of the Iran conflict couldn’t be worse.
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“With the timing of the recent events right here at planting season, it kind of caught us off guard a little bit,” Hutchinson said.
Hutchinson burns about 500 gallons of diesel fuel every day during planting season. On an average day during the fall harvest, he uses about 1,500 gallons of diesel and 5,000 gallons of liquefied petroleum (LP) gas.
Many farmers are trying to get by with what they already have in storage. Hutchinson holds 20,000 gallons of diesel in two metal tanks on his property. He stores 6,000 pounds of LP fuel just a few steps away.
“If we don’t get some resolution here in the next few months, we’ll burn through that buffer that we have here,” Hutchinson said.
On Wednesday, the national average for a gallon of diesel fuel was $4.83. The price has jumped more than a dollar in less than a month.
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Nick Ewen, The Points Guy Senior Editorial Director, said gas prices could keep climbing for several weeks, even after the Iran conflict ends.
“The big question is how high they could go, and we just don’t know. It depends on how long the conflict drags on and how long the bottleneck in the Strait of Hormuz winds up becoming,” Ewen said. “The bottom line is that there definitely is going to be some pain for anyone trying to fill up their car or their truck at the gas pump for, likely, several additional weeks.”
Hutchinson said budgeting for high fuel prices expands beyond the tractors he operates in the field. He pays for the fuel used at all levels of the supply chain.
“We’re getting squeezed on the fuel front for, you know, field operations, and then it’s also on us to move our product to market. Every step of that process has got to have diesel fuel,” Hutchinson said. “It’s catching it at two different angles from the manufacturing cost as well as the transportation cost.”
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In 2023, crude oil made up more than 75% of U.S. petroleum imports, according to the Energy Information Administration. The U.S. exported more than 4 million barrels of its own crude oil the same year.
“If anything, this just really highlights the need for, you know, as much energy independence as possible,” Hutchinson said. “If we can produce as much energy in this country, that helps cushion the blow in times like these.”