Freight costs spike in Q1 as diesel tops $5: U.S. Bank index

The U.S. Bank index report points to a supply-side shift after a prolonged freight recession dating back to mid-2022. Capacity tightened significantly during the quarter as smaller fleets and owner-operators faced rising operating costs, particularly fuel, forcing some to exit the market or idle equipment.

Pricing power returned to carriers during the first quarter. According to the U.S. Bank National Spend Index, carrier pricing power climbed to 216.7, while the shipments index remained relatively subdued at 75.9, highlighting the growing disconnect between demand and costs.

The Midwest led all regions in both volume and spending growth, while the Southwest and Southeast saw declines in shipments but still posted double-digit increases in shipper spending — underscoring how widespread the capacity squeeze has become.

Fuel prices amplify pressure on shippers

Fuel played a critical role in accelerating freight costs late in the quarter. Diesel prices surged sharply in March, including what the report describes as the largest weekly increase on record, with prices rising nearly $1 per gallon in a single week.

That spike translated directly into higher fuel surcharges, adding another layer of cost pressure for shippers already contending with tightening capacity and rising contract and spot rates.

From a FreightWaves SONAR perspective, the national average retail diesel price (DTS.USA) has climbed above $5 per gallon. 

Sustained diesel prices at this level tend to accelerate carrier exits at the margin, particularly among smaller operators with limited access to credit, reinforcing the tightening capacity environment seen in the U.S. Bank data.

While the U.S. Bank index highlights relatively flat shipment activity, SONAR data suggests underlying demand remains resilient.

The Truckload Tender Volume Index (STVI.USA), which measures shipper demand, is currently running approximately 11% to 13% higher year over year. 

That aligns with the report’s characterization of stable — but not surging — freight volumes, with demand holding steady even as supply contracts.

This dynamic — steady demand paired with shrinking capacity — is a classic setup for upward rate pressure, helping explain why spending is accelerating much faster than shipment growth.

Spot rates rose nearly 12% quarter over quarter, according to DAT data cited in the report, while contract rates also moved higher, narrowing the spread between the two.

For shippers, the shift creates a more challenging planning environment. Costs are rising quickly without the typical demand signals that would normally accompany a tightening market.

“What makes this quarter stand out is how abruptly costs moved higher even though freight activity itself didn’t,” Bobby Holland, director of freight business analytics at U.S. Bank, said in a statement.