Fuel Hikes Likely to Spur Trucking Bankruptcies

Surging oil prices could bring catastrophic bankruptcy rates to trucking within nine months, according to a stock analyst who has studied the historic correlation between changes in fuel prices and company failures.

Click here for a larger version
Transport Topics
Trucking bankruptcies (in blue) tend to trail oil price hikes (red) by six to nine months. (Click the graph to see a larger version)
Throughout the 1990s, the rate of trucking company failures followed the price of crude oil, but with a six- to nine-month lag, said Donald Broughton of A.G. Edwards & Sons in St. Louis. He believes that if this correlation holds through the current run-up in prices, it could be devastating to the industry.

Crude oil prices — which eventually become diesel fuel prices — bottomed out in the fall of 1998 at an average for the quarter of $12.57 a barrel. From December 1998 through February 1999 the national average price of diesel was less than $1 a gallon, according to the Department of Energy. One year later, in the fourth quarter of 1999, 280 trucking companies failed, a relatively low number for a three-month period.

TTNews Message Boards
That, however, was the lull before the storm.



For the full story, see the Sept. 11 print edition of Transport Topics. Subscribe today.