News reports over the past few months have described how skyrocketing transportation costs are driving up retail prices for virtually all consumer products. But just like livestock producers, truckers are not easily able to pass higher operating costs on to their customers, or their customers’ customers.
Livestock haulers, for example, have raised their fuel surcharges in recent months, meaning higher bills for cattle owners shipping to grass, to feedyards or to slaughter. Those expenses have not, however, passed up through the chain, and it could be some time before beef prices or cattle prices increase proportionately.
Diesel prices have increased more than 30 percent over the past year to about $4 per gallon, and truckers are feeling the pinch. Bill Graves, president and CEO of the American Trucking Associations, says fuel has historically been the second-highest operating expense for motor carriers, accounting for as much as 25 percent of total operating costs. The recent prolonged climb in fuel prices, however, has, for some carriers, caused it to surpass labor as their largest expense, Graves says.
The cost to fill the fuel tanks on a typical tractor trailer, Graves says, has increased 116 percent, or $615, over the past five years. And truckers don’t expect relief any time soon. In late March, ATA projected a record-high diesel fuel bill in 2008. The organization says the trucking industry will spend $135 billion on fuel in 2008, a $22 billion increase over the $112.6 billion truckers paid for fuel during 2007.
In a March 20 letter to President Bush, Graves stressed the importance of truck transport to the entire U.S. economy and said truckers are making extensive efforts to conserve fuel, such as by driving at slower highway speeds and using auxiliary power units to reduce fuel consumption while idling. But, he added, these steps cannot account for fuel prices that have slashed truckers’ profits and threaten to drive some out of business.
Graves asked the president to release oil from the strategic petroleum reserve. “I know that crude oil inventories are not the problem,” he says, “but the oil industry is no longer functioning on supply and demand fundamentals, as hedge funds drive up the price of crude based on speculation. We need something to break that chain and a SPR release could do it.”
ATA also favors a single national diesel fuel standard, which they believe would help reduce the magnitude of fuel price spikes. The organization supports long-term strategies to increase the diesel fuel supply, such as increased refining capacity and environmentally sound exploration of Alaska’s Arctic National Wildlife Refuge and the Outer Continental Shelf.
Blending high-quality biodiesel at rates of 5 percent in truck fuel also could help conservation efforts. ATA is working with the National Biodiesel Board to enact federal legislation to promote biodiesel in a cost-effective manner, pre-empt state biodiesel mandates, ensure that only high-quality biodiesel is sold and establish a uniform pump labeling system.