Editorial: Skyrocketing Fuel Prices Add Pain

This Editorial appears in the March 3 print edition of Transport Topics. Click here to subscribe today.

As if a slowing economy, depressed housing and auto markets and sharply rising consumer prices aren’t bad enough news for trucking, fuel prices are skyrocketing again.

Retail diesel prices have risen 27.2 cents a gallon over the past two weeks, according to the Department of Energy, and are now at the highest level in history, $3.552 on average across the nation.

Gasoline prices have also been rising, but at a slower pace. The spread between diesel and gasoline last week reached 42.2 cents, the widest gap since October 2005.

And with several weeks of winter remaining, there’s no relief in sight, as home heating oil continues to compete with diesel — both products are made from the same distillates.
The fuel situation is bad for all fleets, but it’s apparently taking a large toll on smaller carriers, many of which are unable to do things like hedge their fuel purchases the way larger fleets do.

“The rise in diesel has taken nearly all of the profit out of the business, and most of our members are struggling,” said David Owen, president of the National Association of Small Trucking Companies.

The sharp appreciation in fuel — pump prices are more than $1 higher than they were 12 months ago — has turned at least one longtime trucking truism on its head.
By Owen’s reckoning, fuel is now costing fleets twice as much per mile as their drivers. Historically, labor always has been viewed as the biggest expense for fleets, big and small.

But when fuel was “only” $3 a gallon, he said, fleets spent about 60 cents a mile on diesel (at 5 miles per gallon). Then and now, drivers cost the company about 30 cents. At more than $3.55 a gallon, the disparity is even greater.

At the current average, a trucker putting 200 gallons of diesel into his tanks spends more than $710, which is $200 more than he would have spent for an identical amount a year ago. These costs don’t factor in the record levels crude oil has hit in recent days. More price increases are, as they say, “in the pipeline.”

So, stay tuned. Things could get worse, and soon.