Diesel price spells misery for U.S. truckers

By Staff -- Purchasing, 10/19/2000

Record-high diesel fuel prices are pressuring U.S. independent truckers to either sell their rigs or merge with larger partners as they steel themselves for what could be another winter of fuel cost misery.

A nationwide shortage of distillates pushed the national retail diesel fuel price to $1.54 a gallon around Labor Day, the highest mark ever recorded by the Department of Energy. With industry experts predicting that costs will only head higher into winter, hundreds of thousands of U.S. truckers who move 85% of the country's freight are bracing for some rough months ahead, says Sandy Soendker of the Missouri-based Owner Operator Independent Drivers Association. The association represents 350,000 independent truckers.

"Thousands of independents are wondering whether they will outlast this price spike," says Soendker.

Late last winter hundreds of truckers clogged the streets of Washington, D.C., with their rigs to protest high fuel costs. Prices are already higher now than they were then as the U.S. contemplates its wafer-thin stocks of all distillate fuels, including heating oil, ahead of the peak winter demand season. National diesel stocks are only 900,000 barrels below last year at this time, according to the American Petroleum Institute. But heating oil stocks are down 29.4 million barrels.

Trucking associations are lobbying to pass a bill called the Motor Carrier Fuel Cost Equity Act that would require shippers to pay fuel surcharges whenever diesel prices rise by more than 5¢a gallon. The bill passed the House Transportation Committee and awaits debate on the floor of the House. But the bill has many opponents including shipping associations who do not want their members to pay more for transportation. The bill may not make it onto the House floor until well into the heating season.

This is bad news for the small independent truckers, which only own a few rigs, because they are less leveraged to deal with fuel costs, the second highest operating cost behind labor. Large trucking companies buy diesel at lower prices by receiving fleet discounts and by hedging their fuel costs on futures markets, like airline companies do.

"Soaring fuel costs are hard enough for the entire industry," says Bob Costello, chief economist for the American Truckers Association. "But for independents, its devastating."