Higher Diesel Gas Prices Squeeze Trucking Industry
Jul. 22–Surging diesel-fuel prices are squeezing a trucking industry that already is in the throes of a driver shortage.
It’s a combination that could lead to higher prices on store shelves, according to experts.
The fallout so far:
–Some companies’ profits are shrinking as they fight to keep drivers and deal with fuel costs.
–More owner-operators, essentially independents, are shutting down because they can’t afford fuel on what have been slim profit margins.
–Shipping costs for food, beverage and consumer products are on the rise. A study this month by the Grocery Manufacturers Association and IBM Consulting Services said transportation costs have climbed 23 percent during the past three years and now are 62 percent of all logistics costs.
”Somewhere down the line, I’m sure the consumer ends up paying for it,” said David F. Bartosic, spokesman for the Ohio Trucking Association. ”But there is a long trickle-down before the consumer will get it in the wallet.” The first to be hit have been trucking companies and owner-operators.
Like gasoline, diesel fuel has hit record highs. On average, the price for a gallon is 62 cents higher than a year ago, according to the Owner-Operator Independent Drivers Association in Grain Valley, Mo.
Nationally, diesel fuel hit a record average of $2.47 per gallon on Sunday. The Ohio record, also $2.47, was reached last week.
”It certainly is having an effect because it is the second-highest cost,” Bartosic said.
The top costs are wages, which some companies boosted to retain drivers during the shortage.
Owner-operators, meanwhile, are seeing earnings fall, said Todd Spencer, executive vice president of the owner-operator association.
They typically receive 90 cents to $1.15 per mile, and then buy their own fuel. The higher fuel prices can increase costs by up to $30,000 a year.
”This is somebody who was netting only about $35,000 a year, anyway,” he said.
Trucking companies have responded with fuel surcharges, but Bartosic said they have not always worked.
”A lot of times, that surcharge is totally up to the shipper’s willingness to pay it,” he said.
Take consumer-products companies. The Grocery Manufacturers Association said companies are trying to get around higher trucking costs by switching to less-expensive rail.
Some also are changing the way they use trucks, such as sending only full loads instead of partial loads.
Association spokeswoman Stephanie Childs said companies have avoided passing the higher costs onto consumers.
”The reality is if fuel prices continue to increase beyond expectations, then certainly it will be seen in store-level prices,” she said.
Spencer said owner-operators lack the clout needed to collect a fuel surcharge from the trucking companies and freight brokers that hire them.
Those companies use surcharges but often do not share them with owner-operators, he said.
Congress is considering adding a provision to the federal highway bill to change that. The owner-operator group said the provision requires surcharges to be given to the buyer of the fuel, or in this case, owner-operators.
Spencer said diesel last spiked in 2000-2002, when 250,000 trucks were repossessed from owner-operators.
”We are in a situation where the same scenario is coming into effect,” he said.
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