How are high fuel prices affecting truckers?
Diesel, gas, oil. Fuel is the lifeblood of the trucking industry. In fact, our entire economy runs on the basis of fuel. The recent rising costs have a ripple effect that reaches every person in one facet or another.
Warren Groseclose, the CEO of Lawrence Companies, said during a recent interview on WDBJ 7 from Roanoake, VA, “On a weekly basis we burn about 23,000 gallons of diesel, both on the road and here in the yard, and just in the last week the increase in diesel prices has added about $23,000 weekly to our cost, which on an annual basis is $1.2 million.”
And that $1.2 million is from just one company.
The hard-hitting fuel increases impact Canadian companies and drivers as well. Rick Friesen, CFO of Crossroads Express, based in Aylmer, Ontario sees the increase hitting north of the border noting a $15,000 increase in fuel costs with a projected impact of more than $780,000 (CDN) annually. “Within the first week of noticing the increase, we added a 15% fuel surcharge,” said Friesen, “with very little resistance. Some have said our surcharge was better than others.” Many companies are combating the increased costs with their own surcharges.
Fuel prices and surcharges, though, are inevitably passed along to each party, from the supplier to the manufacturer, to the shipper, to the trucking companies, and to the consumer. As costs rise, prices of products, products that we rely on like food and clothing, will increase in response to the growing cost of business. And it all ties back to the price of fuel.
While costs are passed on to consumers, small trucking companies and owner/operators may not have the capacity and resources to manage the immediate changes. The billing cycles vary up to 90 days meaning some companies may not have a financial reserve to carry them through until the bills are paid.
Smaller companies and owner/operators find their resources immediately consumed with higher operating costs making it cost-inhibitive to continue driving. One driver lamented that he’d recently purchased a second truck to begin building his small fleet, but with the sudden increase in costs his freight charges are now only covering his operational expenses. There’s no profit for him, only headaches and financial stress, causing him to reconsider his purchase of a second truck, which could directly impact the driver hired to run the truck.
Couple the rising fuel cost with the existing supply chain issues that linger from the pandemic, as well as improved wages that some companies have offered to draw in new drivers, the impact on trucking companies can be debilitating. For some, devastating. Facing a major breakdown or the need for new equipment could spell the demise of a small company or owner/operator.
To make matters worse, the inhibitive costs of driving or operating a small fleet have caused some drivers to simply park their trucks. It’s not worth it anymore. As a result, the trucker shortage worsens.