Diesel at a Record $6.53 Pushes Surcharges Into Paper Pricing

U.S. diesel hit a record $6.53 per gallon on Sept. 22, and paper and packaging producers are now pushing that cost directly onto customer invoices through fuel surcharges. Sylvamo, Billerud and Sustana have all announced new fees within weeks of one another, and analysts do not expect relief before 2028.

Sylvamo issued a news release in late September announcing a $1 per hundredweight fuel surcharge effective on shipments as of Oct. 1. The company said it expects "other mills to follow given the run up of diesel costs."

They have followed. Billerud and Sustana imposed surcharges calculated by tonnage rather than hundredweight: $25 per ton of paper and paperboard as of Nov. 1 for Billerud, and $20 per ton on all grades starting Oct. 12 for Sustana.

Why can mills not switch transport modes?

William O'Neil, a principal analyst at S&P Global Energy, said many U.S. manufacturers examined ways to mitigate diesel prices and found mode-shifting unworkable. "You don't really have another choice," he said. "You have to move those goods from point A to point B ... and in the U.S. there really aren't any sort of scalable alternatives to diesel trucks."

Paper mills have felt the pinch of high transportation costs in 2026, according to a Sept. 30 Fastmarkets RISI post citing unnamed sources. The post said reliance on trucking combined with high fuel costs could prompt mills to shorten the distance from which they source recycled fiber feedstock.

Executives at Ball, Cascades, Graphic Packaging International and International Paper discussed fuel cost inflation and possible responses during earnings calls and industry events earlier this year, before diesel reached its September record. Sonoco CEO Howard Coker addressed his company's surcharge on a July 23 earnings call: "It will come and go as diesel varies. ... This is not new to the world."

On July 29, Smurfit Westrock executives said they baked freight inflation into their third round of containerboard price increases this year while exploring other options. CFO Ken Bowles said freight cost "remains the most significant headwind we face in 2026."

What drove diesel to record levels?

Two wars constricted supply. The Iran war started Feb. 28 and resulted in a nearly full closure of the Strait of Hormuz, hampering shipments from several major suppliers. Attacks on Middle East refineries curtailed output, constricting supply from the region for more than six months.

Over the summer, Ukraine ramped up attacks on Russian refineries. Russia, traditionally the second-largest diesel exporter behind the United States, exported about 800,000 barrels per day last year; that has fallen to around 120,000 barrels per day after Ukrainian drone strikes reduced capacity. The U.S. exports about 1.5 million barrels per day.

"The role of the United States in supplying the global diesel market has grown significantly this year," O'Neil said, noting the U.S. has accounted for about a quarter of all seaborne global diesel exports in recent months. U.S. demand stays steady at about 4 million barrels per day, with up to 75% going toward trucking. "Your supply curve is shifted down, but your demand curve really hasn't budged that much — you end up with significantly higher prices," he said.

The retail price eased to $6.32 per gallon as of Wednesday, still roughly 75% higher than a year ago. O'Neil called that level "still exorbitantly high."

How long will the surcharges last?

S&P Global Energy anticipates diesel prices will peak this quarter, when supply limits meet seasonal demand peaks. Supply is not projected to change much into next year. "We expect diesel supply globally to remain pretty constrained throughout the fourth quarter into 2027," O'Neil said.

He does not anticipate U.S. diesel below $5 per gallon until early 2027. "We don't really expect much getting back to normal before 2028," he said. "Our running assumption is that something changes that allows more oil out by sort of the middle of 2028."

A September Federal Reserve Bank of Dallas survey of oil and gas executives, drawing responses from leaders at more than 100 companies, points the same direction:

• Nearly 30% expect Middle East crude exports to normalize in Q2 2027; more than 20% said 2028 or beyond.
• Nearly half expect the diesel-crude spread to take more than four quarters to return to 2025 levels; nearly 25% said three to four quarters.

What should buyers and suppliers do now?

It is too early to measure order or volume impacts, or whether customers frontloaded shipments ahead of the fees. Fastmarkets RISI noted Oct. 1 that mills' attempts to procure materials more efficiently could influence recovered paper generation and collection.

Some observers argue transparent surcharges beat the alternative: packaging professionals on LinkedIn have highlighted that fuel and freight surcharges are more likely to be pulled back when conditions improve than costs absorbed into base prices, which tend to stick. Even so, O'Neil advised building a long-term diesel cost management strategy. "We're looking at pretty prolonged pain," he said.