‘It feels like playing a video game when the level of difficulty just increases’: Cannabis companies adjust to record spike in oil prices

Cannabis companies and ancillary businesses are facing new economic challenges as U.S. military operations in Iran have led to record spikes in oil prices and increased inflationary pressures.

On Friday, sobering government reports underscored the uncertainty in the region and rippling effects across the globe. Energy prices in March rose nearly 11%, fueled by a 21.2% surge in gas prices, the highest monthly increase since 1967 when the U.S. Bureau of Labor Statistics began publishing the gasoline index as part of the broader Consumer Price Index.

While some experts predict the escalating energy crises could continue for months, a few oil tankers have passed through the Strait of Hormuz in recent days as the U.S. Navy clears out seabed mines in the waterway amid a tenuous cease fire.

On Sunday, President Donald Trump on Truth Social announced the Navy would enforce a blockade Monday morning on all Iranian ports in the Strait following unsuccessful negotiations with Iran to end the war. Meanwhile crude oil prices have surged past $104 per barrel, adding more capital strain to cannabis operators. 

Nabis, one of the largest cannabis distributors in California, Nevada and New York, was hit with a 33% increase in fuel prices within a quarter. The San Francisco-based company this year projects to spend $2 million on gas, a steep 60% increase from $1.25 million in 2025. 

In New York it’s forced to take circuitous routes avoiding the New Jersey Turnpike, a tollway into Manhattan and other parts of the state, because the path violates federal interstate marijuana transportation laws. In California, the average price of gas April 12 was $5.894, the highest in the country, according to AAA.

“It feels like playing a video game when the level of difficulty just increases a bit and you have to think of new ways to address problems,” founder and CEO Vince Ning told Cultivated.

The company, according to Ning, isn’t expected to adjust contract terms as it did during the pandemic when gas prices soared.

“We're about five times larger than we were back in 2021,” he said. “We'll shoulder the burden, just given our scale, for as long as we can.”

Nabis has raised more than $30 million in venture capital, investing significantly in route optimization technology and software to improve logistics. While fuel costs are cutting into the bottom line, its market leader position is helping attract new brand customers for distribution and its short-term financing business, highlighting the often paradoxical nature of the regulated marijuana industry.     

“A lot of folks who are self-distributing may find it difficult to keep up,” Ning said.

LuvBuds, a nationwide accessories distributor and custom manufacturer based in Denver, increased freight prices in January for the first time in its 11-year history.

The surcharge, which primarily affects local deliveries, were in response to 7% to 10% rate increases from its product transportation providers, primarily trucking companies and common carriers like United Parcel Service and United State Postal Service.

“We had to do a little adjusting to our freight policies,” President and Chief Operating Officer Philip Martin told Cultivated. “Our local deliveries used to be free and now we have a small fee.”

The company supplies over 300 dispensaries with bowls, pipes, clothing and other items, and provides business intelligence tools and budtender incentives to boost revenue for a category that generally accounts for about 1% of store sales.

Product delivery delays and vendor unpredictability are more common these days for LuvBuds as freight carriers struggle to keep up.

“You're getting quotes on a Tuesday that are no longer good on a Thursday,” Martin said. “We’re seeing some service delays, which means we've got to plan better. We've got to ship earlier and get ahead of it.”

On the international front, supply chains have yet to see major disruptions, primarily because of stockpiled inventory though logistics challenges are increasing amid rising shipping and fuel costs, according to Wesley Petzer, a consultant for Dutch nutrient and substrate brand Atami, which works with growers around the globe.

With massive price increases already hitting certain agricultural inputs, such as potassium chloride, ammonia and sulfurs, cultivators will likely feel the initial impacts.

“Farmers are going to take the brunt of it,” Petzer told Cultivated.

Stateside, cannabis delivery companies and drivers are particularly feeling the squeeze.

Michael Diaz-Rivera’s delivery business in Denver was already struggling after losing key retail partners within the last year. Some shuttered; others were acquired.

Escalating operating costs, particularly over the last few months, made the business untenable. The social equity license holder closed Better Days Delivery a few weeks ago, days before $3,000 in state licensing renewal fees were due.

“The cost of payroll and insurance alone was enough for me to second guess it, but looking at gas prices and everything that's been going up lately, it just didn't make sense,” he told Cultivated.

The Happy Car, a new delivery service in Las Vegas operated by Deep Roots Harvest and its retail subsidiary, The Source, is ready to take some lumps out of the gate.

“I think we'll take a haircut on margin in the immediate term, but hopefully these gas prices come back down,” Chief Operating Officer Jon Marshall told Cultivated.

Deliveries are available at seven of the companies’ nine locations in Nevada, where the average price of gas is about $5 per gallon, the fifth highest in the country. The company is not delivering near their rural desert stores in Mesquite and West Wendover, along the Utah border.

In some states, certain rules are cutting into take home pay. 

In Connecticut, for example, cannabis delivery companies are required to only pick up orders from retailers and transport purchased products. That means some drivers at Cannabis Connection Delivery travel up to 45 minutes to pick up their first order, completing only a few trips per shift. 

Owner Cody Richard is inclined to provide bonuses or other incentives to help boost compensation and retain drivers. 

The company does not reimburse drivers for gas though, a business model that underscores the financial constraints of operating in a small market with minimal growth.

“We've lost people because of the dynamic,” Richard told Cultivated.

Its fleet of 10 drivers cover about 75% of the state with daily deliveries from 10 partner dispensaries. To help offset his own driving costs, Richard has joined membership incentive programs at BJ’s Gas, ShopRite and Stop & Shop.

“I'm knocking a few cents off my gas,” he said. “It helps.”