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High Diesel Fuel Costs Drains Independent Truckers' Wallets

Posted on: Tuesday, 5 July 2005, 18:00 CDT

Jul. 2--Truck driver Dino Distefano leaned against his 18-wheeler, sweating.

It wasn't the 90-degree heat causing his forehead to drip. It was the record-high diesel prices.

Two years ago, diesel was $1.42 a gallon. Today, it is 65 percent higher, at a national average of $2.34 a gallon.

That's tough for independent truck drivers like Distefano.

"It's killing us," Distefano, of Parma, said as the fuel pump's meter raced above $400 at the Pilot truck stop in Richfield.

Fuel is the largest expense for many independent truck drivers, accounting for 20 percent to 40 percent of total operating costs.

Many large trucking companies, such as Akron's Roadway Corp., don't have to worry about such increases, because they can pass along the higher cost to shippers in the form of a fuel surcharge, based on a fuel price index prepared by the U.S. Department of Energy.

But independent truckers, who haul much of the nation's freight, say they have to swallow the increases because they don't have the volume and pricing power of large haulers. So they feel the squeeze every time diesel prices climb.

"I'm starving," Distefano said, adding that he is cutting back on medical insurance and other expenses.

Mick Stankovic, an independent driver from Yugoslavia who was also fueling at the Pilot station in Richfield, said he now pays between $500 and $600 for a fill-up.

"Last year, I could fill up for $300," he said. "This year, no way."

In the past two years, the average income for independent truckers has fallen about $12,000, said Todd Spencer, vice president of the Owner-Operator Independent Drivers Association. Normally, independent drivers could make $35,000 to $40,000 a year, he said.

"It's quite a squeeze," Spencer said.

Distefano said he is paying about$6,000 per month for fuel, but can still support his wife and three children.

"I make money but I don't make enough to make a living like I used to," he said.

But some drivers are getting hammered.

"I get so many calls from small truckers that are just getting creamed because they cannot pass their higher fuel costs on to their customers," said Jacob Bournazian, a diesel price expert for the Energy Information Administration. "I don't know any small trucker that is doing well."

In extreme cases, Bournazian has heard from drivers who have lost $1,000 in one shipment because of fuel costs that are higher than their income for shipping.

"You can only take that hit once or twice and your doors are closed," he said.

While watching the fuel dial spin higher and higher, Distefano said he wondered what is making prices soar.

Experts point to many reasons. Demand has climbed 5 percent this year for diesel, compared with 2 percent for gasoline, said Sara Banaszak of the American Petroleum Institute. Meanwhile, supply has not kept pace.

In addition, the rising cost of crude oil is pushing up diesel prices. Crude oil costs typically account for half the cost of diesel. Crude oil hit a record high of $60.95 a barrel on Monday before settling somewhat in subsequent days. It closed Friday at $58.75 on the New York Mercantile Exchange.

Tavio Headley, an economist for the American Trucking Associations, pointed to another reason for high diesel prices: There is no nationwide standard for diesel. Regulations vary state by state. So when a diesel refinery goes down, that could lead to expensive problems.

For example, Washington state customers saw diesel prices quickly rise when a refinery there temporarily closed. The state had recently implemented new requirements for diesel that were different from others in the region. It cost much more to import from a few states away than from next door.

Not having a diesel standard is "a definite contributor to the run-up (in price) we've been seeing," Headley said.

But a standard isn't the ultimate solution, Bournazian said.

"Making this change in the law won't change the fundamental problem -- tight supply," he said.

For independent truck drivers, there's not much relief in sight, Headley said.

The Department of Energy estimated that diesel will continue to hover around $2.20 per gallon in the next two years. That could mean continued tough times for drivers.

"You're going to see diesel prices rise another 3 to 5 cents over the next few weeks, then plateau," Bournazian said.

So higher diesel prices will continue to affect drivers like Jusus Garay, an independent driver from El Paso, Texas.

When fuel prices are high, Garay has to cut back on recreation for his wife and two kids.

Despite the squeeze, he plans to keep truckin'.

"You always want to call it quits," he said, "but the American way is to keep pushing forward."

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Copyright (c) 2005, Akron Beacon Journal, Ohio

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YELL,

Source: Akron Beacon Journal (Akron, Ohio)

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