Record-high diesel fuel prices in the U.S. are putting a squeeze on the trucking industry and shifting more freight to the railroads.

Trucking and logistics services provider J.B. Hunt expects earnings to sequentially decline within a range of 5 percent to 10 percent in the third quarter due to the elevated costs, chief financial officer Brad Delco said at Morgan Stanley’s annual Laguna Conference late Tuesday.

Upon enduring what Delco called “some of the most radical and abnormal swings in fuel prices…we have ever seen,” J.B. Hunt will incur an additional $10 million in headwinds during the quarter, he said. J.B. Hunt stock declined more than 13 percent in Wednesday morning trading following the conference.

According to the U.S. Energy Information Administration (EIA) on Monday, U.S. on-highway diesel price prices have reached $6.285 per gallon, surpassing the $6 mark for the first time.

Overall fuel costs have risen substantially since late February, when the war in Iran kicked off and the country’s military forces began disrupting shipping in and out of the Strait of Hormuz, a crucial conduit that harbors 20 percent of the world’s oil and natural gas supply.

Diesel fuel prices have spiked 65 percent since Feb. 23, when they were $3.809 on average, the EIA says. On a weekly basis, diesel increased 5.3 percent.

When asked whether it would be good or bad news for diesel prices to remain over $6 per gallon by the company’s October warnings call, Delco called it “a double-edged sword” highlighting that pricing stability would improve the situation.

Although he noted that the price swings are “very hard to deal with,” Delco said J.B. Hunt’s fuel surcharge programs are effective at covering the costs.

The exec said the fuel spikes and ensuing higher trucking rates are very good for intermodal demand, with units that are transferred between trucks and railroads increasing 4 percent in the first 36 weeks of the year, according to data from the Association of American Railroads. In comparison, carload units that stay on trains have increased 2.7 percent.

In a media briefing with the Port of Long Beach, Anne Reinke, president and CEO of the Intermodal Association of North America (IANA) said the high fuel prices are making some owner operators unable to sustain their business, “so they shut down.”

While larger carriers like J.B. Hunt can typically recover much of any fuel increase through surcharges, smaller carriers that usually operate in the spot market may have less ability to recover higher fuel costs.

Reinke said U.S. regulatory policies such as the enforcement of English-language proficiency and the crackdown on driver training schools are taking capacity out of the industry, which exacerbates the fuel costs’ impact on trucking rates.

“If you have low capacity in the trucking space, that means prices are going up, and so people say, ‘Well, I want to use an option. What’s another option for me? So they’re turning to intermodal,” said Reinke.

At the Morgan Stanley conference, Darren Field, J.B. Hunt’s president of intermodal, described the economics of the current dynamic.

“There’s a lot of shippers out there that may use intermodal for 75 percent of the lane, and they use highway for 25 percent, and maybe they tweak that to 90/10 or even 100 percent intermodal,” Field said. “There’s plenty of that opportunity. There will be customers that are under intense pressure from their own budgets that are calling and all of a sudden initiate a mini-bid.”

In the “mini-bid” process, shippers return to their carriers outside their typical annual bid cycle to renegotiate rates or reallocate freight on a shorter timeline than their originally allotted contract cycle.

During the same event, Norfolk Southern confirmed the railroad side of the equation, with its execs saying the company is seeing “some share gain” across both intermodal and various merchandise markets like consumer products, steel and lumber because of the fuel price increases.

“It’s just pulling freight off the road,” said Norfolk Southern’s chief commercial officer Ed Elkins during the event.

In the week prior to Sept. 5, total intermodal volumes at Norfolk Southern increased 13.7 percent from year-ago numbers to 82,417 units. The intermodal volumes comprised 57.8 percent of the railroad’s total units moved.

However, like J.B. Hunt, the fuel price points are becoming a headwind for the railroad, which now expects “really elevated prices for the remainder of the year,” said chief financial officer Jason Zampi.

According to Zampi, Norfolk Southern’s operating ratio in the third quarter is forecast to take a 250-basis-point (2.5-percentage-point) hit due to the expenses.

“We were calling for a maybe better-than-seasonal sequential improvement from second to third,” Zampi said. “Now we actually think we’re going to be a little bit worse-than-seasonal performance really due to that what’s happening with fuel.”