Average U.S. diesel prices have risen $2.546 a gallon from a year ago, according to the U.S. Energy Information Agency.
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Record-high diesel prices and soaring costs for construction materials are increasingly putting the pinch on contractors who in some cases are facing slimmer profit margins and projects getting delayed or canceled, according to the Associated General Contractors of America.
“Construction firms are being squeezed by tariff- and war-induced materials cost increases, even as they boost wages to attract personnel,” says Ken Simonson, AGC chief economist. “Those cost increases, according to our latest survey, are a major reason project owners are canceling, postponing or scaling back projects.”
Diesel prices have seen some of the most dramatic rises this year, primarily due to the war with Iran driving up oil costs.
According to U.S. Energy Information Agency, the average on-highway diesel price per gallon in the U.S. was $6.29 on September 14. That’s up $2.55 a gallon from a year ago.
According to AAA, average diesel prices at the pump hit an all-time high of $6.45 a gallon on September 18.
Contractors can pay less for diesel for off-road machinery, but even when subtracting state and federal taxes for “red dyed diesel,” they are still taking a big price hit.
Citing recent producer price index data, AGC reports a 77.8% rise in diesel prices at the refinery or fuel terminal level from August 2025 to August 2026. The index for liquid asphalt rose 16.4% year-over-year, according to the association.
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An Equipment World online readers’ poll in June indicated diesel prices were causing 81.5% of responding contractors to change their business strategies. The most common action among respondents, at 40.3%, was raising bid prices or hourly rates, followed by adding fuel surcharges to contracts, at 31.1%.
Widespread Increases
Associated Builders and ContractorsOther than petroleum products, metals affected by tariffs as much as 50% have also shot up in the past year. AGC cites the following increases:
27.3% for aluminum mill shapes.
23.4% for steel mill products.
20.9% for copper and brass mill shapes.
The Associated Builders and Contractors has also been tracking price data. ABC notes that construction input prices increased 1.2% in August from July. It reports that overall input prices are 8.9% higher in the past year.
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“Construction input prices surged again in August, and the increases were widespread across materials,” said ABC Chief Economist Anirban Basu. “Prices for iron and steel, softwood lumber, switchgear, copper wire and cable, and several derivative metal products are now up more than 10% year over year.
"While contractors remain optimistic about their margins, according to ABC’s Construction Confidence Index, ongoing input price escalation is likely to weigh on profitability over the next several months. This is especially true given recent escalation in the trade war with Canada and the fact that oil prices have jumped back above $100 per barrel.”
Associated Builders and ContractorsRising Wages Add to the Squeeze
On top of material cost inflation, wages have also continued to rise for construction workers. AGC cites government data from September 4 showing a 5% increase in average hourly earnings for production and nonsupervisory employees from August 2025 to August 2026.
A recent survey of AGC members indicated 55% have seen projects canceled, postponed or scaled back in the past six months. “One-third of respondents attributed the disruptions to increasing costs,” the association says.
The AGC is calling on Congress to address the rising material and labor costs by resolving trade disputes, increasing funding for construction training programs and establishing a process for people to legally enter the country for temporary construction work.
“As firms pay more to address labor shortages and materials prices continue to climb, they are caught between pricing themselves out of the market or performing work at a loss,” says Jeffrey D. Shoaf, AGC chief executive officer. “Rising materials prices and a lack of real federal commitment to construction workforce development are acting as a brake on economic activity that could, if left unaddressed, have significant consequences for the broader economy.”
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