Fleet Management News & Business Info | Commercial Carrier Journal
Issue link: https://read.dmtmag.com/i/85369
JOURNAL TRUCKGAUGE Fueling concerns over recovery Rising prices strain cash, could dampen demand BY AVERY VISE A s of March 19, diesel prices have risen 35.1 cents, or 9.5 percent, since the beginning of the year and have risen for eight straight weeks and 10 of the last 11 weeks. During that time, gasoline prices have soared 57.4 cents, or 16.4 percent, and have risen for eight straight weeks and 12 of the last 13 weeks. As fuel price surges go, this one is fairly mild compared to the record-setting runups Gasoline hikes might hurt as much as those for diesel. during spring 2008 or in the weeks immediately following Hurricane Katrina. In fact, the pace of rising diesel prices is well below this same period last year when prices soared 61.3 cents, or 17.3 percent, in the wake of unrest and rebellion in the Middle East and North Africa. Gasoline prices during the same pe- riod jumped 49.2 cents or 15.6 percent. But trucking executives, owner-operators and American motorists don't necessarily care that fuel costs aren't rising as much as they have in past years – especially when there are reasons to believe the situation could grow even worse. Tensions with Iran could send crude oil prices higher, and as the U.S. economy recovers, demand for petroleum presum- ably will rise as well, putting upward pressure on prices – barring, of course, a collapse in demand elsewhere, such as China or India. Rising diesel prices have several effects on trucking operations. Most obvious is the increase in costs – not all of which can be re- captured through fuel surcharges. And there is the cash fl ow drain resulting from the lag in payment of surcharges. In the monthly Randall-Reilly MarketPulse survey of for-hire trucking executives for February, one trucking executive summarized this challenge succinctly: "With fuel rising so fast, the fuel surcharges will be fall- ing behind, and our net fuel costs will keep escalating. " Pressure on freight rates is a slightly less obvious but perhaps more troubling effect of rising diesel prices. "It really concerns me with fuel continuing to go up that it will be diffi cult to get the increases we need to offset our overhead," said another truck- ing executive in the survey. Said another, "Increased costs in fuel will further assault customers' budget allotment for transporta- tion spend, which will then begin to attack core linehaul rates once again." About the only upside to rising diesel prices – and admittedly it is a potentially signifi cant one – is that an increase in failures due to cash crunches would tighten capacity even further, giving carriers more pricing leverage. Meanwhile, higher gasoline prices damp- en consumer demand for goods – a key component of freight demand – by soaking up disposable income. "Turmoil around the world is causing a spike in fuel prices, which AVERY VISE is executive director, trucking research and analysis for Randall-Reilly and senior editor, in- dustry analysis for Commercial Carrier Journal. E-mail avise@truckgauge.com. 20 COMMERCIAL CARRIER JOURNAL | APRIL 2012 could result in consumers pulling back and a freight slowdown," said another trucking executive in the survey. This is perhaps even truer in recent years than in the past as consumers have less access to credit or are choosing not to buy as much on credit. Higher energy prices also spur infl ation, which similarly reduces consum- ers' buying power. The pieces are in place for a continued recovery in trucking – provided fuel prices don't keep rising. FUEL-SAVING TACTICS The February 2012 Randall-Reilly MarketPulse survey of for-hire trucking executives asked participants to identify tactics they are using to improve their fleets' fuel efficiency. Here are the percentages (rounded to the nearest whole percent) for the 98 respondents: Speed limiters* Driver training Driver monitoring Auxiliary power units 84% 74% 70% 58% Automatic tire pressure monitoring 48% Low rolling-resistance tires Wide single tires 40% 38% Automated/automatic transmissions 32% Trailer skirts Low-weight components Lower-horsepower engines Low-viscosity lubricants 32% 25% 22% 17% * Among the large majority of carriers that govern the speed of their trucks, the average governed speed was 64.79 mph. The February 2012 MarketPulse report can be purchased at www.etrucker.com/store/research