Diesel crosses $6 a gallon as Hormuz closure continues
American business owners and policymakers are grappling with whether high energy costs and trade-war volatility are temporary nuisances to wait out or entrenched features of the economy that call for price increases now. Some businesses are split between raising prices to reflect what they now see as the new reality and holding the line on the bet that the Iran war’s disruption will prove temporary. The pricing dilemma cuts across industries and company sizes, playing out against a Federal Reserve that is widely expected to raise interest rates this week.
Other firms have changed their tune on pricing as the war and trade uncertainty have persisted, and as volatile commodity prices have swung back and forth. Some firms are passing higher costs to customers; others are absorbing them in pursuit of market share; still others are waiting for more clarity before acting.
Melissa Florio, who with her husband owns New Hampshire-based Ambix Manufacturing, said the company had gone three years without raising prices, with her expecting surging costs to settle down. Ambix sells plastic components — including insulators for high-voltage transmission wires — to power-distribution customers. But as oil prices continued to push up the cost of resin, the chemical used in the company’s products, Florio changed her outlook. She no longer views the Iran war as a temporary price shock, she said, but rather a long-term barrier to keeping costs stable. When suppliers raise prices now, she passes the burden on to her customers. “We reached the breaking point,” Florio said. “We’re not eating that cost any longer.” Ambix raised prices between 10% and 21% on all of its products this summer. The days of viewing price shocks as “blips,” Florio said, are over.
On the other side, third-generation Pennsylvania farmer Jim Barbour, who sells beef, pork and milk, has watched the cost of trucking hay from three counties away rise around 15%, but has chosen to keep prices stable. “Our fuel situation, in my opinion, is temporary,” Barbour said. “It’ll be back down once we get things straightened out.” Barbour has raised meat prices only once in the last five years; higher input costs have meant smaller profits at his farm, which also offers glamping, Airbnb stays and a Texas-built smoker barbecue food trailer.
Diane Swonk, chief economist at KPMG, said the nature of the price shocks has changed. “Shocks used to be episodic. You could ride it out,” she said. “Now they’re endemic.” Swonk described a recent call with industry economists as “one of the scariest calls I’ve had in a long time,” with concerns that if energy inflation accelerates again, companies that have held pat would soon need to start raising prices.
Energy costs have continued to climb. Diesel prices crossed $6 a gallon for the first time on Friday. Trump administration officials have insisted that the situation is temporary, but some oil executives are cautioning that the prolonged closure of the Strait of Hormuz — and new threats to another key energy chokepoint in the Red Sea — is spinning out of control.
Walmart has gone in the opposite direction, cutting prices on more than 10,000 items despite billions of dollars in forecast fuel-related costs. Chief Executive John Furner told investors the company made that decision to increase market share and “because customers need us to.” The strategy reflects a calculation that lower prices now can win customers whose loyalty will pay off after inflation recedes.
Campbell’s has moved the other way. In June, the soup maker told investors that pricing adjustments were “kind of the last resort,” with Chief Financial Officer Todd Cunfer saying elevated costs were expected to come down. “Unfortunately,” Cunfer said last week, “that was not enough given the extreme amount of inflation.” Campbell’s is now raising prices on more than half of its portfolio.
Clorox, which earlier this year said it was approaching pricing decisions with “a high level of discipline and caution,” now expects inflation to add another $200 million of costs this fiscal year — more than double the normal amount. The company is raising the cost of its signature Glad trash bags as resin prices climb.
The pressure extends beyond consumer-goods giants. At LupinePet, which makes dog collars and leashes from globally sourced materials, co-owner Dave Jensen said tariffs and fuel surcharges have pushed costs higher, prompting a 5% price increase this summer. His wife and co-owner Valerie Jensen described an unfamiliar uncertainty: “We went through the Great Recession. We went through Covid. But I never before had that feeling that I don’t know how to price things.” Gerald Commissiong, interim co-CEO of health-tech company DataMeds AI, summed up the prevailing frustration: “We’ve been told it was going to happen, and it didn’t happen” — referring to the inflation cool-down businesses had been expecting.
Mark Zandi, chief economist at Moody’s Analytics, said robust profits across U.S. corporations are a sign that most companies might already be passing along higher input costs to consumers. More than a third of wage earners saw a decline in purchasing power between late 2020 and late 2024, according to a recent analysis of human-resources company ADP’s data.
For Florio, the daily calculus has become personal. “Every day I go, ‘dear Lord, I don’t know how much longer we can take this,’” she said. “When do we retire?”