Trucking Industry Adjusting to Higher Costs

While many contract truckers and Owner/Operators have been squeezed out of business, the regulated trucking carriers have not been as negatively affected by the higher fuel costs as one might assume. Since diesel fuel prices rose above $1.50 per gallon in 2004, buyers of transportation services have encountered the phenomenon of finding an added charge on their bills. Aptly called the "fuel surcharge," and shown on most freight bills as the "FSC,", the charge is spreading to most forms of transportation suffering from rising fuel costs.

In the trucking industry, fuel has surpassed labor as the largest cost component for the first time. Nevertheless, the fuel surcharge has been around in some form since the first oil "shortage" and the first Gulf War. As fuel prices began to escalate in earnest, some remedy had to be found to quickly compensate trucking firms for the higher fuel costs. Since fuel costs are most often immediate, in that many truckers do not "hedge" future fuel purchases, but rather fuel on-the-road at retail prices, the solution was a flexible fuel surcharge that could rise quickly and, at least in theory, decrease as prices dropped.

Trucking firms, as stated above, now find fuel as their largest cost per mile in operating an over-the-road truck unit.. While many have raised their base rates over the past several years, coping with a spiraling diesel price has kept most truckers focused on just trying to recoup their higher fuel spend. Contracts for transport usually include a mutually negotiated "fuel surcharge formula" that allows the motor carrier to add a percentage or flat amount when diesel fuel prices reach a certain amount. Many are still based on, or "pegged" at, around $1.50 per gallon; the fuel price encompassed in the base rate per mile, per hundredweight, or other rate basis. It is likely safe to assume the $1.50 per gallon price will never be seen again. Consequently, a fuel surcharge is reality today, yet with the thought at least that they can be eliminated or reduced when or if the price of oil drops.

The innovative motor carriers are pursuing various ideas to conserve fuel and/or lower fuel costs overall:

• Slowing speeds will certainly help. The gearing ratios on today's modern tractors mean that slowing down too much can actually adversely affect fuel mileages. Still, slowing speeds is the single one thing a driver can do to improve fuel efficiency.
• Teaching "driver optimal shift points" can add miles-per-gallon by keeping RPMs at ideal levels. Shifting gears and keeping engine RPMs as low as possible, saves fuel.
• Coasting in gear produces "free mileage," since the vehicle actually uses no fuel when backing out of the throttle.
• Idle time should always be limited. The best truckers use a rule-of-thumb: anytime a truck will be parked and the driver away from the truck for more than five minutes, the engine should be shut off. Several states have laws that impose fines for excessive, lengthy engine idling. (Argonne National Laboratories research revealed that long-duration idling of commercial trucks may exceed 3 billion gallons of fuel per year!)
• Down-shift only when necessary by staying in high gear as much as possible. This takes practice, but the best drivers do it all the time.

For the American trucker, the adjustments are already underway. Many innovative changes, aided by technology, are helping; improvements are being seen in driver training and on-board technologies. The driver's habits are changing as are the "assists" with devices to monitor mpgs, shift-points, and even tire pressure. While there will still be casualties within the industry over the next few quarters, the fuel charge mechanism and innovative responses from truckers will ensure that trucking will continue to play its strong supportive role in the U.S. economy.