The rapid rise in diesel fuel prices this month is squeezing freight transportation companies and their customers, and leaving small trucking operators struggling to catch up with the escalating costs.
Independent operators and smaller fleets are most exposed to diesel prices that have hit record highs because they have less leverage with shippers and are having a harder time matching fuel surcharges to the rising rates at the pump.
“It’s been difficult,” said Derek Crusenberry, director of business development at JSG Trucking Co. in Acampo, Calif., which has 20 trucks hauling lumber, steel, canned food and other goods in Northern California. “We have had to find ourselves diving into our margins to support operations, to keep the wheels turning, quite literally.”
In negotiations over freight rates, the shippers JSG works with have been slow to accept price increases that match those in diesel, forcing the company to delay repairs and other expenses, he said.
The dramatic increases are outpacing their ability to pass on added costs.
Prices for diesel, the fuel used by truckers and in a swath of industrial operations, shot up by more than $1.10 a gallon in the two weeks immediately following Russia’s invasion of Ukraine. The invasion has plunged global energy markets into turmoil and sent the price of crude surging.
The average national price of $5.25 a gallon the week of March 14 was the highest in U.S. Energy Information Administration records dating to 1994, and the jump of nearly 75 cents a gallon earlier in the month was the steepest one-week gain ever. Even a pullback to $5.13 a gallon for the week of March 21 left the national average price up more than $1.50 since the start of the year.
The increased pump prices are adding hundreds of dollars a week to the costs of operating each truck, and carriers are scrambling to keep up.
Trucking companies use fuel surcharges to cover swings in diesel prices, and those surcharges have risen on average to 43 cents a mile from 19 cents at the start of the year, according to Truckstop.com.
Fuel surcharges typically lag diesel prices by a week as they rise, executives said, but carriers can benefit as prices decline before the surcharge catches up.
A. Duie Pyle Inc., a less-than-truckload carrier based in West Chester, Pa., with 1,800 trucks serving the Northeast, said it topped off a 500,000-gallon storage tank, up from 70,000 gallons of diesel, just before Russia invaded Ukraine, a benefit of size that has insulated the business somewhat from the steep, sudden fluctuations in price.
But now the carrier is adjusting its fuel surcharge mechanism to take into account diesel prices far outside the scale that was set several years ago.
“Nobody contemplated back then we could see diesel costs in excess of $5 a gallon,” said Peter Latta, chairman of A. Duie Pyle.
The price for diesel in the mid-Atlantic region that includes the company’s service area was $5.47 a gallon the week of March 14, according to EIA figures, up more than $2 from a year ago.
“The velocity of the increase has really been dramatic,” Mr. Latta said, but added that so far customers “have been very understanding.”
Larger carriers generally have lines of credit and working capital that provide a financial cushion, so even if they are paid 30 or 45 days after they haul the loads, “whatever pain you incurred today, it’s made good on within a couple of months,” said Avery Vise, a trucking analyst at FTR Transportation Intelligence.
“But a smaller carrier, even if it’s getting surcharges, if it’s not getting that surcharge paid until a month or month-and-a-half down the road, they’re going to have to float that difference in the interim,” he said. “And that’s potentially problematic.”
Smaller operators are adjusting operations to save on fuel, taking steps such as limiting idling and cutting speed. Some are even turning away longer-haul loads to focus on shorter runs to keep their expenses down, industry executives said.
Sadaya Morris, a truck owner operating in the Northeast as Pink Transportation LLC, said her fuel expenses jumped from around $250 a week to roughly $400 the week after Russia invaded Ukraine. She has since shifted her business away from freight brokers—middlemen who Ms. Morris said can be stingy in passing along fuel surcharges—to working more directly with customers.
Weekly fuel costs at Superior Modular Transport Inc., an 11-truck fleet based in Stockton, Calif., are up about $10,000 a week over the usual spending, said President Daniel Titus, and the flatbed company’s drivers are working 10 to 20 fewer hours a week because customers are balking at the higher charges.
“Ultimately, if it continues, we could possibly have to park trucks,” Mr. Titus said. There has been a “shock factor,” he added, because Superior’s customers tell the carrier they can’t pass the higher cost of freight transport along to their own customers quickly enough to keep up with the rising prices.
Average diesel prices in California are the highest in the country. At about $6.22 a gallon the week ending March 21, the price across the state was nearly $2.24 a gallon higher than it was a year ago.
Michelle Kitchin drives a refrigerated truck between California and Michigan for midsize operator Van Eerden Trucking Co., based in Byron Center, Mich. The cost of filling up for a two-week trip has jumped 25% this month to about $3,000, she said. She has been driving slower to conserve fuel, but has to balance the need to save money against meeting delivery schedules—on top of legal restrictions on how many hours she can drive.
“You have to be practical when making these decisions,” she said.
Write to Lydia O’Neal at [email protected]
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