Diesel Prices and Construction Costs: How to Protect Bids and Margins

Fuel has become the most unpredictable line in a construction estimate. According to weekly U.S. Energy Information Administration data, the national average price of on-highway diesel reached $6.53 a gallon in the week of September 21, 2026, the highest level of the year, and was still $6.18 in the week of October 12. For comparison, diesel averaged about $3.66 a gallon across all of 2025.

The cause is not a mystery. Fighting involving Iran and disruption to shipping through the Strait of Hormuz have pulled crude oil above $100 a barrel, with Brent averaging $114 in September. Diesel has been hit hardest because distillate supplies were already tight: East Coast distillate inventories were 32% below their five-year average in September, according to the EIA.

How diesel prices raise construction costs

Fuel rarely appears as one line in an estimate, which is exactly why it causes trouble. It shows up in at least four places:

• Equipment operation. Excavators, loaders, dozers, cranes and generators burn diesel every hour they run. Off-road equipment can use lower-taxed dyed diesel, but the underlying fuel price has still risen sharply.
• Hauling and delivery. Aggregate, concrete, steel, lumber and drywall all arrive by truck. Suppliers and haulers have been adding fuel surcharges, and those costs pass straight into material quotes.
• Fuel-intensive materials. Asphalt is made from crude oil, and producing cement, steel and glass takes a lot of energy. The Associated General Contractors of America reported liquid asphalt up 16.4% year over year in August.
• Everything downstream. In September, crude petroleum prices rose 28.3% and unprocessed energy materials 22.2%, pushing overall construction input prices up 2.2% in a single month.

Fuel is not the only pressure. Tariffs have pushed up metals, with steel mill products up 23.4%, aluminum mill shapes up 27.3% and copper and brass mill shapes up 20.9% year over year, according to AGC. Labor is getting more expensive too. Put together, these increases explain why ABC chief economist Anirban Basu called September's 11.2% rise the largest year-over-year increase in nearly four years.

The real problem: prices that change after you bid

Rising costs are hard, but they are not the biggest risk. The biggest risk is an estimate priced with last month's numbers, on a fixed-price contract, for work that will be built next spring. A bid that was profitable when it went out can lose money by the time the equipment starts.

Contractors are caught between pricing themselves out of the market or performing work at a loss.

Jeffrey D. Shoaf, CEO, Associated General Contractors of America

Owners are feeling it as well. In AGC's latest survey, 55% of firms said projects had been canceled, postponed or scaled back in the previous six months, and a third of them blamed rising costs. More than one in four ABC contractors expect profit margins to shrink over the next six months.

The common responses are understandable. In a June Equipment World reader poll, 40% of contractors said they had raised bid prices or hourly rates, and 31% had added fuel surcharges. But raising prices across the board without knowing where the exposure sits can cost you the job, while guessing too low can cost you the margin.

What the forecasts say

The EIA's October Short-Term Energy Outlook expects retail diesel to stay above $6 a gallon through October, with Brent crude averaging about $105 a barrel in the fourth quarter. If shipping routes recover and inventories rebuild, the agency expects diesel to ease gradually to an average of about $4.50 a gallon in 2027.

That forecast cuts both ways. Jobs bid today and built in 2027 could be over-priced if you lock in today's fuel costs, or under-priced if the recovery stalls. What contractors need is not a perfect forecast but estimates that show their fuel exposure clearly and can be updated quickly.

7 ways to protect your bids and margins

1. Re-price every bid with current regional rates. Do not reuse unit prices from earlier in the year. Fuel, asphalt, steel and delivery costs have moved too much since spring.
2. Shorten quote validity. A 30-day price hold made sense when prices were stable. In this market, 7 to 14 days on fuel-sensitive scopes is safer.
3. Break out fuel-sensitive line items. Separate equipment hours, hauling, asphalt, concrete delivery and fuel surcharges so you can see exactly how much of the bid depends on diesel.
4. Use escalation or fuel adjustment clauses. Tie fuel costs to a published index, such as the EIA weekly diesel price, with a baseline and a trigger. Have your attorney review the wording before you use it.
5. Cut fuel use at the takeoff stage. Accurate earthwork quantities can balance cut and fill on site and reduce hauling. Accurate material quantities reduce extra deliveries and waste.
6. Price alternates. Give owners value-engineering options, such as alternative paving sections or materials, so projects can move forward instead of being shelved.
7. Revise fast when prices move. If the bid date slips or an addendum lands, update the affected lines quickly rather than re-pricing from scratch.

How NYNMO Estimating can help

Accurate, up-to-date estimates are your best protection when costs are volatile. That is the work we do every day for contractors across the USA, Australia, Canada and the UK.

• Current regional pricing. Every cost estimate is priced at current material and labor rates for your project's location, not last year's averages.
• Fuel exposure you can see. We break out equipment, hauling and fuel-sensitive materials as their own line items, so you know what to protect with a surcharge or escalation clause.
• 24 to 48 hour turnaround. Fast estimates mean the prices in your bid are days old, not weeks old.
• Revisions included. When an addendum lands or the bid date moves, we update the affected numbers. Reasonable revisions are part of the original quote.
• Earthwork and sitework precision. Our sitework takeoffs calculate cut and fill balance, helping you plan to haul less, and our concrete estimates list pours and deliveries separately.
• Budgets for owners deciding whether to build. Preliminary and budget estimates help developers decide whether to proceed, phase or value-engineer a project instead of canceling it.
• Capacity without overhead. A dedicated estimator can re-price your whole bid pipeline as costs change, without the cost of another full-time hire.

If you have a bid going out soon, or a backlog that was priced before diesel crossed $6, send us your plans and we will reply within one business day with a firm price and turnaround.

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