How Rising Gas Prices Are Squeezing Small Businesses — And What to Do About It

By Mark Valentino, President of Business Banking at Citizens

Rising gas prices are compressing margins for small businesses across every fuel-dependent sector. The businesses that navigate fuel volatility best are not simply the ones that cut costs. They are the ones with financial visibility and the right tools to absorb shocks, adjust pricing, and keep growing.

According to the U.S. Department of Energy, fuel costs have increased 40% or more in most of the country in the last year; diesel is up by roughly 60%.¹ High prices may remain for some time. Damage to fuel production infrastructure has created a supply shock that will likely take months to resolve.

For small businesses that depend on fuel, that price difference lands directly on the bottom line. The solution is not just managing costs at the pump. It is having the financial visibility and tools to see the pressure coming and respond before it becomes a crisis.

My playbook for protecting cash flow and margins during fuel volatility includes three priorities: Track margin impact in real time, establish credit access before you need it, and put your banking relationship to work as an early-warning system.

Why gas prices hit small businesses harder than large ones

Large companies can hedge fuel costs, lock in contract pricing, and weather margin compression across multiple business lines. Most small businesses I talk with have none of these options available to them.

Citizens data shows that close to half of small businesses feel the drag of inflation on their success, and even the 46% expecting a revenue increase say managing rising costs is a top challenge. Businesses in transportation, food service, contracting and delivery feel this most directly. For them, fuel is not overhead; it is a direct share of cost of goods sold (COGS), and it hits the bottom line immediately.

But the real problem is not the price at the pump. It is the absence of financial visibility to know how much pressure the business can absorb before it becomes a crisis. Cost-cutting tactics like fuel cards and route optimization help, but they cannot substitute for that clarity. Only 36% of businesses without financial advisory relationships prioritized cash flow in 2025, compared with 52% of advice-driven businesses. That gap becomes dangerous when a fuel price increase hits.²

The urgency to act is real. J.P. Morgan Global Research data shows geopolitical disruptions to oil supply have driven price increases averaging 76%, with elevated costs persisting long after the initial disruption.³

A financial framework for managing fuel volatility

What separates businesses that come through fuel volatility from the ones that struggle often comes down to five things. Here is the framework I share with small business owners facing this environment.

1. Isolate and track fuel as its own cost line

Managing fuel volatility starts with knowing exactly what fuel is costing you as a share of your business. That means creating a dedicated sub-account or expense category for fuel within an accounting system and treating it as a major input cost. The important distinction is tracking fuel as a percentage of COGS every month, because that is what tells you whether your margins are holding or starting to slip. Among small businesses anticipating revenue growth in early 2026, 51% cite better digital financial tools and analytics as a key factor.⁴

2. Know your margin floor before a price spike hits

Every business has a fuel cost threshold above which the numbers stop working. The businesses that come through strongest know that number cold. To keep your business from crossing over that point, review your client contracts now to confirm you have the right to adjust pricing in response to documented input cost increases. Many companies can weather a short-term spike, but if fuel prices remain high, some businesses are going to be in more serious trouble. Your pricing model needs to be stress-tested before that moment arrives, not during it.

3. Build a credit buffer before you need it

A business line of credit (LOC) should already be part of your permanent financial architecture. A business LOC exists precisely for unpredictable cost events like fuel spikes. A well-structured LOC may allow you to avoid cutting operations or deferring growth investments by drawing on an LOC to stabilize cash flow during the disruption, then repay as prices normalize. Among small businesses anticipating revenue growth in early 2026, 51% say they'll increase credit use via an LOC.⁴ Some business LOCs make funds available to eligible businesses in as few as two to three business days.

4. Use pricing transparency with customers

Adjusting your pricing or adding a fuel-related line item to your invoices is a sound business decision. An increase rarely damages a relationship, but a lack of communication might. Give customers advance notice of any price adjustments and itemize fuel-related costs as a separate line when you bill. Most business customers understand the current fuel cost reality, and that kind of transparency builds trust rather than eroding it. Plan for pump prices to stay higher longer than you expect. Relief at the pump typically lags well behind any broader drop in fuel prices.

5. Lean on your business banker as an early-warning system

In my experience, the businesses that come through external cost shocks with the least damage are the ones already in regular conversation with a banker who knows their financials well enough to spot trouble early. In our 2025 Business Outlook Survey, 58% of advice-driven businesses speak with their CPA, attorney or business banker at least weekly, and those businesses are substantially better prepared when an external shock arrives. A skilled business banker should not just be there when you need financing; they should be reviewing your numbers alongside you, flagging margin compression before it becomes a cash flow emergency.

Potential issues and strategies to address them

The right framework will take you far, but in my experience some challenges are inevitable. Here is how to handle them.

Issue: Fuel costs are passed to customers, who push back on price increases.

When a customer pushes back on a fuel-related price adjustment, the response that protects the relationship is transparency. Acknowledge the concern directly. Explain that the increase is tied to documented input costs, not a margin decision. If you have not already spelled out the fuel-related portion as a separate line item, offer to do so. Frame the increase as a measure tied to current conditions rather than a permanent reset, since that gives the customer something to hold onto and gives you room to revisit pricing when costs stabilize.

Issue: Not qualifying for an LOC during the crisis.

A common mistake I see is business owners applying for an LOC after a cost shock has already strained their financials. A compressed balance sheet is simply not the strongest position from which to begin that conversation with a lender. Work with a business banker proactively to understand necessary documentation, revenue thresholds and required credit standing. Use tools like Citizens' working capital calculator to model your needs before a crisis forces the conversation.

Issue: Lack of financial tools to track fuel costs closely.

Tracking fuel costs granularly starts with a dedicated expense sub-account or a recurring report in your existing accounting system reviewed consistently every month. Many businesses may have this data available, but what's missing is the discipline to isolate fuel as its own line and review it with the same rigor as any other major input cost. If you want deeper insight into how fuel costs are affecting your margins in real time, that is exactly the kind of financial insight the right cash management tools and an engaged business banker can help you build.

The businesses that come through stronger

Fuel price volatility is not a new phenomenon, and it will not be the last cost shock you face. What I have seen consistently is that the businesses that emerge stronger are the ones that had the right financial foundation in place before the pressure arrived. This includes visibility into their margins, access to capital, and a banking relationship that helped them see trouble coming early enough to act.

Citizens' 2025 Business Outlook Survey backs this up: businesses that prioritize financial advice and data-focused tools are substantially more likely to demonstrate strong cash flow management, make confident decisions under pressure, and maintain growth plans that survive disruption. That gap between advised and unadvised businesses does not close during a crisis — it widens.

Do not wait out the volatility. The goal is to build a financial foundation that makes you resilient enough to keep growing through it.

Frequently asked questions

How do rising gas prices affect small business cash flow?

Fuel costs hit the expense side of the ledger immediately, but recovering that margin through pricing adjustments takes time, and that gap is where cash flow problems develop. Businesses with fuel as a direct input cost are especially exposed because there is little elsewhere in the cost structure to absorb the pressure while they wait for pricing to catch up.

What can small business owners do to protect margins when fuel prices rise?

The most effective response to fuel volatility is building a financial foundation that holds up regardless of when a spike arrives. That means knowing your cost structure, reviewing your contract terms, and having credit access established before you need it, because those are the things that give you real options when costs move. Route optimization and similar adjustments matter at the margins, but they rarely compensate for the absence of real-time visibility into what fuel is actually costing the business.

Should small businesses use an LOC to manage fuel cost spikes?

Because fuel volatility tends to be cyclical rather than permanent, a business LOC is a logical fit. You draw during the compression period and repay as conditions normalize, without sacrificing operations or growth investment in the interim. Timing matters, since a lender evaluates your application against your current financials, which is why establishing access during a period of stability tends to put businesses in the strongest possible position.

How can a business banker help during periods of rising operating costs?

The most valuable thing a banker can do during a cost shock is help you see it clearly before it becomes a crisis, which requires a relationship built on regular, substantive conversations about your numbers. That means reviewing margin trends, modeling how sustained cost increases affect your working capital position, and making sure your credit capacity is appropriately sized for the business you are running today. Businesses I see navigate volatility best are the ones where that relationship was already doing real work long before the pressure arrived.

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