The most important price in America is one most drivers never pay - and it reaches the CPI, the Fed and the European Central Bank in the same week
Diesel prices at record highs are a big deal for consumers - even more so than what they pay for regular gasoline at the pump.
There is a truck stop off I-81 in Virginia where a gallon of diesel now costs more than a gallon of milk, and everyone is acting shocked.
On Wednesday, the national average price for diesel hit a record $5.94 a gallon. That beat the record set just days earlier, which beat the one from June 2022 - back when a number like that meant Russia had invaded somebody. The 2022 record lasted four years; the 2026 record lasted less than a week.
Shocked? What did you think was going to happen? A war closed the Strait of Hormuz - the water where the oil lives - and the number went up. That is the entire story, and there are people with doctorates who cannot say it out loud.
Six months ago, diesel was $3.76 a gallon. Now it is up 57%, and you are thinking, "I don't buy diesel - not my problem."
Everything is diesel: The truck that delivered your car. The tractor that cut the wheat. The trailer that kept the chicken cold between Arkansas and your store. The train, the ship, the hospital generator. You live in a diesel snow globe, and somebody just shook it.
Diesel is a tax. You can't call it a tax; a tax needs a guy to raise his hand and own it. This has no guy. 57% - no vote, no fingerprints. The perfect crime, and it's legal because nobody wrote it down.
The bill comes 90 days after the meal
The Independent Grocers Alliance, comprised of 7,500 supermarkets, says fuel is 15% to 30% of the total cost of food. Not shipping the food - the food itself.
And yet grocery prices in July rose just 2.7%, and the official food price index actually fell for the month. So relax - the government checked, and dinner is fine.
The government is not lying to you; the government is 90 days behind you. You already know what the chicken costs - you were there. The Bureau of Labor Statistics was not.
David Ortega, a food economist at Michigan State University, explained the machine to the Associated Press: Freight contracts absorb the cost first, then contracts reprice, then the shelf gets the bill. Contracts reprice every 30 to 60 days. August's record diesel entered that window about the time you started reading this.
You can watch your future grocery bill in transit: The stage of the producer-price index furthest from your cart rose 3.2% in May, the biggest jump since 2009. The stage closest to the shelf rose 1.1%. The gap is the bill, in the pipe, with tracking.
The first deliveries landed: Seafood was up 7%, fresh fruit was up 4.9% - everything that rides a refrigerated truck was up, because the cold chain burns the most diesel per mile. Amazon (AMZN) added a 3.5% fuel surcharge in April. United Parcel Service (UPS), FedEx $(FDX)$ and the U.S. Postal Service followed quietly - the way surcharges travel.
Federal Reserve governor Christopher Waller said this month that he does not see energy spreading into other prices. He reads the consumer-price index; you read receipts. One of you is current.
One number says panic, one says relax. They're the same number.
On Friday morning, the August consumer-price index prints. Economists expect a month-over-month increase of 0.4% for the headline number, and a 0.2% rise at the core.
Core inflation - you know what core inflation is? Inflation minus food and energy - minus eating and minus driving. They built a cost-of-living measure that excludes living, and that is the number the smart people trust.
So on Friday, the headline will scream energy and the core will whisper calm. Both are true, and they cancel out on schedule, 20 minutes apart. Nobody planned that. That is the part that should bother you - nobody has to plan it anymore.
The freight bill is not in either number. The lag is three to six months, which lands it in the October through January prints - after Thursday's European Central Bank vote, after the Federal Reserve's meeting next week. Three Fed officials - Beth Hammack, Neel Kashkari and Lorie Logan - already voted to hike in July. Waller says August data decides his vote. The committee is not divided. It is waiting.
Everybody is losing money on this - except the people making all of it
Somebody is collecting this tax. There is always somebody collecting.
There are the refiners running domestic crude (CL00), where the markup between crude in and fuel out is printing triple digits per barrel. Marathon Petroleum (MPC), Valero Energy $(VLO)$ and Phillips 66 (PSX) - their stocks have all more than doubled this year. It is a club, and you are not in it. But this club sells tickets. That is what a stock exchange is.
Also collecting: inflation-linked bonds, especially European ones still priced as if the shock washes out. And gold (GC00), which works whenever central banks fight a thing they cannot fix.
Paying: airlines, with United $(UAL)$ cutting about 5% of planned capacity. Truckers stuck on prewar contracts. Retailers eating freight to protect volume. European stocks broadly, with the ECB tightening into a 0.8% growth forecast.
A tractor in Kansas burns diesel. A trailer burns it hauling your chicken. A truck in Stuttgart burns it, and Christine Lagarde sees 14.3% on a spreadsheet and raises the price of money. Not the price of anything - the price of money.
They collect in basis points now, because basis points don't hit your wallet. They hit your mortgage, later, when you can't prove who did it.
The bill's in the mail - certified, with no return address.
Charlie Garcia is founder and a managing partner of R360, a peer-to-peer organization for individuals and families with a net worth of $100 million or more. His Capital Mischief Substack covers financial markets and geopolitics. Follow him on X here.
-Charlie Garcia