Fuel: Pounding The Trucking Industry

Even though the per-barrel price of crude oil has dropped to $124 as of this writing, American truckers still face a long and winding road ahead. That per-barrel crude oil figure means that diesel fuel costs $4.60 per gallon on average.

The American Trucking Association (ATA) has estimated in the past that increasing the price of fuel a dime per gallon means that 1,000 fleets go out of business. That may have been a bit of inflated rhetoric even for the time and doesn’t hold true today. The industry has developed some strategies for mitigating the effects of higher fuel prices.

According to Ben Evans, president of MASS Logic, a software provider for the trucking industry, fuel used to be 20% of the operating cost of a truck. Now it’s about 60%. Evans said that in most cases, freight prices haven’t been able to keep up with the increases in fuel prices. Even the companies that have been able to keep up are still losing out on profit margins and business value. He continued that other businesses aren’t shipping as much, which means that there are fewer loads for truckers to haul. It’s a spiral that feeds on itself.

According to Evans, independents and small trucking firms have the toughest time raising their prices to reflect their increasing costs. They risk losing customers when they try to pass along the price increases. When demand is low and there are excess trucks sitting idle, raising prices is a tough choice. Road Transport Forum Chief Executive Officer Tony Friedlander has some advice for the hard-pressed – take a hard look at your client list and weed out those who resist paying higher freight delivery charges.

Friedlander added that a few clients are being unrealistic in their demands that haulers maintain their present rates. The truck industry operates on comparatively small profit margins, thus the clients’ refusal to pay the higher costs is putting operators at risk, particularly the smaller ones and the independents. The ATA has offered some initiatives to deal with the bite that fuel costs are taking out of truckers.

Among them are limiting the U.S.’s speed limit to 65 miles per hour and setting new truck governors no higher than 68 mph. While these strategies sell well to the “green” segment of the population, they might not do so with truckers who have to get a load of peaches from Georgia to market in New York City, for example.

The American Transportation Research Institute (ATRI) has another idea: increase the weight limits on rigs. This would require fewer trucks on the road, cutting down fuel costs. However, this also means there will be fewer truckers working.

The rising cost of fuel is a many-headed Hydra looming in front of the trucker who doesn’t have many weapons to fight it. Once the “head” of passing on the costs to clients is cut off, the “head” of reduced speed limits springs from the stump. This isn’t great news for the little guy trying to make a living.