After twenty years in the computer business I changed careers and went into the trucking business. I have been driving a “big rig” now for seven years. In that short time I have seen a number of changes, most notably the price of diesel fuel.
As a company driver, the effects of higher diesel fuel are more subtle than they are to an owner-operator, but they are noticeable. As fuel prices rise, companies necessarily need to charge more to carry freight. In the trucking business this is done with a fuel surcharge, which is charged to the shipper or consignee. The fuel surcharge is generally calculated at $.01 per mile for every $.05 increase in the price of fuel over $1.20 per gallon. Some companies use a different trigger rate, but the calculations are the same. With diesel fuel at about $3.88 per gallon, that means that companies are adding about 54 cents for every mile of every truckload of freight.
Consider that I am carrying a load of milk in plastic jugs to a Walmart distribution center, say in Bedford, Pennsylvania. By the time that milk gets loaded on my truck, it has been on at least two other trucks. One truck gathers milk from the farms, and takes it to the dairy where it is processed and bottled. From there, another truck picks it up and takes it to a grocery warehouse. Perhaps it is labeled there, or it may have been labeled at the dairy. I will pick it up from the warehouse, say in Springfield, MO. From there, I drive it to Bedford, PA to the Walmart Distribution Center. From there it will be put on yet another truck and delivered to several stores throughout Western Pennsylvania. Each one of those trucking companies is charging a fuel surcharge.
So when I pull my rig into Walmart, and go inside to buy a gallon of milk, I understand why it costs about $4.00 today, when it used to cost about $2.50. Everything we purchase in a store got there on a truck. As diesel prices rise, so do the cost of all goods we purchase.
The price of a gallon of diesel is not just related to the price of goods. Jobs are at stake as well. In late 2007 there were 1.7 million truck drivers employed in the United States. Diesel fuel continued to rise through 2007 and hit a peak in mid 2008 of $4.72 per gallon.* That took its toll on the American economy. Housing bubble notwithstanding, available freight began to drop off in early 2008. This caused a temporary excess in available trucks, which put downward pressure on freight rates. Despite the high cost of fuel, carriers were forced to take less for their loads, or park some trucks. This balanced out at the cost of small trucking companies being forced out of business, and drivers losing their jobs, about 200,000 of them by early 2009. Diesel prices had dropped by then to about $2.20 per gallon, and slowly, freight picked back up. By 2010, trucking companies were hiring again.
The recent spike in fuel prices has brought us close to the edge one more time. I notice that I am paying more, not just for milk, but for everything when I go into the truck stop. Other truck drivers have talked to me about parking their trucks when diesel rose to over $4.00 per gallon in April of this year. We haven’t gone over the edge again yet, but if fuel prices surge upward again like they have over the past year, we may all be paying a lot more for a gallon of milk.
*Statistics from the US Energy Administration & Federal Highway Administration
Bruce MacIsaac is a published writer and drives a commercial truck for West Penn Diesel in Shelocta Pa