Life on the Road

Fuel Prices Weigh on Drivers

These days, the No. 1 concern on the minds of owner-operators— and company drivers, for that matter—is the price of diesel fuel.

Crude oil prices reached an all-time high of $58.28 on April 4 (the deadline for this issue of Over the Road) and appeared to be heading higher.

If the price of crude oil is on the rise, it’s a safe bet that diesel fuel is getting more expensive, too. Sure enough, as crude oil reached record levels, so did the price of diesel fuel. According to the Department of Energy, the national average retail price of a gallon of diesel climbed over the $2.30 barrier for the first time on April 4 to $2.303—an increase of 5.4 cents per gallon from the previous week.

As usual, California led the way up-ward. The DOE reported a 6.9-cent spike in the Golden State, bringing the state’s average price of a gallon of diesel to $2.581 a gallon on April 4. Ouch.

For those of you keeping score at home, the $2.303 national average price was 65.5 cents more than a gallon of diesel cost at the same time a year ago. The trucking industry burns about 650 million gallons of diesel a week. Simple math tells us the industry shelled out $425 million more for fuel the first week of April 2005 than it paid for an equal amount of fuel that week in 2004.

Something has to give. In this case, carriers and fleet owners pass the extra cost along to shippers, who in turn pass it along to their customers. Eventually, it hits everyone in the pocketbook in the form of higher prices for just about everything that’s delivered by a truck.

Of course, consumers are also hit at the pump. The national average retail price of a gallon of gasoline reached $2.217 a gallon on April 4. According to one economist, each penny-a-gallon boost in gas prices is the equivalent of a $1 billion annual fee on consumers.

Before we hit the panic button, let’s keep things in perspective. Oil futures would have to exceed $90 a barrel to match the inflation-adjusted peak set in 1980. That’s little solace, though, if you happen to be an owner-operator used to paying $1.40 a gallon for diesel fuel and suddenly you’re paying $2.30 for that same gallon. Fuel surcharges help ease the financial pinch, but the surcharges can’t seem to keep pace with the rapid increases at the pump.

“We’re pretty lucky. We get good fuel surcharges,” says veteran owner-operator Ron “Snuffy” Smith. “Without that, we probably wouldn’t even have our own truck right now. The real answer, though, is you have to raise the freight rates. You can’t haul cheap freight and cover all your expenses. It just doesn’t work.”

Source: DOE