The trucking industry is the life blood of the economic body. The rising fuel prices it is facing may make us all sick in the wallet.
It is a basic fact of life that trucks need fuel to operate. Fuel makes up around 25% of the operating costs for the average truck fleet. This is the second highest operating expense trailing only labor costs. Here is an idea of how much impact a rise in fuel prices can have on trucking operating expenses. In 2004, trucks consumed a total of 32 billion gallons of diesel fuel. At that figure, a one cent increase in diesel fuel cost would result in a 320 million dollar increase in operating expense.
The American Trucking Association (ATA) once estimated that for every ten cent increase in fuel cost one thousand fleets go bankrupt. This may have been a bit of an extreme, and it certainly is not true today. Trucking fleets have developed some basic policies for coping with the ever increasing cost of fuel. The most important of these is the fuel cost surcharge.
This method passes on the cost of the increase to the freight customer who in turn certainly passes it on to the ultimate consumer. At least, the trucking industry is not forced to bear the entire burden. It is estimated that fuel cost surcharges recoup somewhere around 70% of the lost revenue from fuel cost increases. Although some outside the trucking industry would see these surcharges and the burden being put on the ultimate consumer, this would pale beside the impact on the average consumer of the trucking industry shutting down completely.
There are other tactics that trucking fleets can use to soften the impact of rising fuel prices. The practice of fuel economy is a basic tactic. The same figures that show the impact of a rise in one cent in fuel cost can be used to illustrate the savings, industry wide, of conserving an extra gallon of gas. Another tactic used is hedging against future increases by purchasing large quantities of fuel during price downswings and storing it for use during high cost periods. This requires storage and pumping facilities and is thus available only for the larger fleets.
It is the small fleets and the independent truckers that are hurt the most by rising fuel costs. They are not able to hedge during higher price periods, and do not do the have the total business to benefit the most from the competitive nature of fuel surcharges. There is no doubt that rising fuel prices has impacted everyone from the consumer to the largest trucking fleets, and despite some tactics that soften the blows somewhat, it will continue to be a problem as little price relief is seen in the future.
Carl Stinson is with TruckingCompaniesforyou.com - providing a list of trucking companies in each state.