Rising Diesel Costs Are Straining U.S.Truckers, Shipping Operations
Updated: Aug 12, 2022
The soaring price of diesel is hitting smaller trucking fleets that make up the bulk of the highly fragmented U.S. trucking market particularly hard.
Diesel costs are reaching new highs across the U.S., straining the operations of trucking companies and wrecking the transportation budgets of businesses that need to ship goods.
The price of the fuel that powers heavy-duty trucks has increased by more than$2.46 a gallon in roughly two months, according to the U.S. Energy Information Administration. The national average price has climbed to $4.62 a gallon, setting a record for the second week in a row, as prices at the pump surpassed $6.50 in some markets.
Rising energy prices, along with higher material costs and growing labor expenses, have helped push inflation in the U.S. to a four decade high.
The costs have hit consumers at the pump, with gasoline prices across the U .S. up by about a third since the start of the year. The price for diesel fuel that is crucial to industrial business has continued going up. That has added to rising costs in supply chains and to inflation pressure on things from housing construction to deliveries of consumer goods.
CONTRACT RATE TRENDS VS SMALL COMPANIES
The costs are hitting smaller trucking fleets that make up the bulk of the highly fragmented U..S. trucking market particularly hard, worsening cash flows for businesses that tend to be lightly capitalized with little cushion to absorb sharp changes in costs.
The national average price of diesel has risen about $2 a gallon since the start of the year and pump prices have surged past $6 a gallon in several regional markets, including New England and Central Atlantic states. In California, where historically fuel costs more than in the rest of the country, the average price is above $6.46 a gallon.
U.S. commercial vehicles, including big rigs, burn about $6.4 billion gallons of diesel annually, according to the American Trucking Associations.
Trucking companies generally can cover rising diesel prices through fuel surcharges that are built into contracts. But the thousands of smaller fleets and independent owner operators that make up the bulk of the highly fragmented truck market have a harder time passing along the added expenses.
The rising operating costs are hitting those operators just as base shipping prices on trucking's spot markets are dropping on wavering freight demand.
Larger trucking companies that work more with long-term contracts that include fuel surcharges tend to be more insulated from the ﬂuctuations.
For small fleets fuel costs have gone up 25% to 30%, adding extra cost to lower rates. It is coming directly out of the proﬁt for independent truckers.