$4 diesel putting squeeze on truckers, consumers

By Chris Dettro

GATEHOUSE NEWS SERVICE

Over-the-road truckers are now paying nearly $4 per gallon or more in Illinois for diesel fuel, and that translates to more per gallon of milk, per bottle of beer and per stick of lumber for consumers.

Prices on Wednesday ranged from $3.97 to $4.09, believed to be among the highest ever charged in Illinois for diesel fuel.

Trucking companies have applied a fuel surcharge to their customers’ rates for the past couple of years, said Don Schaefer, executive vice president of the Mid-West Truckers Association in Springfield, which has 2,700 members.

“But the price of diesel has really gone up in the past year,” he said. “It was $2.70 a gallon a year ago.”

According to the Energy Information Administration’s weekly retail on-highway diesel price report issued Monday, the average cost of a gallon of diesel fuel in the Midwest was $3.96, a few pennies less than the national average. The price was up 17 cents during the past week and was $1.29 higher than a year ago.

“For the past couple of years, the industry has been pretty good at educating drivers about determining their costs of operation,” Schaefer said. “They can better gauge how to implement the surcharge. If you have that under control, you can easily implement the fuel surcharge on a per-mile basis.”

Increased transportation costs, passed on to shippers in the form of a surcharge, are then passed on to the consumer in the form of higher prices. Even the cost of delivering diesel fuel to the pump is higher.

“You’re seeing it right now,” Schaefer said. “The cost of a gallon of milk, any goods or services delivered by truck to Wal-Mart or Target, they’re all higher.”

Schaefer said the proportion of the purchase price of food that goes toward the cost of fuel varies depending on how far the goods are shipped.

“Fresh cantaloupe came on a ship from South America and then had to be trucked up,” he said. “A good percentage of the cost is transportation. It’s why food costs so much in the wintertime. That’s why sweet corn is so cheap in the summertime. It’s grown right here.”

Kevin Montgomery, office manager of Boesdorfer Trucking Inc. in Pleasant Plains, said most customers understand the surcharge “and that it’s not our fault.”

He said Boesdorfer, which has 17 trucks transporting building materials and fertilizer to most of the 48 contiguous states, bases its surcharge on the national weekly diesel fuel price because it hauls nationwide.

“Our regular customers get a break over the surcharge we use for occasional customers,” Montgomery said.

“We do out-price ourselves sometimes because of the surcharge” on fixed-rate hauls that aren’t billed on a per-mile basis.

The Virginia-based American Trucking Association is projecting record diesel costs for the estimated 3 million large trucks traveling the nation’s highways in 2008. ATA said Monday that the trucking industry will spend $135 billion on fuel in 2008, based on fuel-price forecasts.

That figure represents a $22 billion increase over the $112.6 billion spent by trucking in 2007.

ATA president and CEO Bill Graves said that historically, fuel represented the second-highest operating expense for motor carriers, accounting for as much as 25 percent of total operating costs. For some trucking companies, however, fuel is close to surpassing labor as their largest expense.

Graves said there is little to suggest that fuel prices will decline any time soon.

The cost to fill the fuel tanks on a typical tractor-trailer has increased 116 percent, or $615, in just five years, according to the 37,000-member ATA. And because trucks haul 70 percent of all freight tonnage, rising fuel costs have the potential to increase the cost of everything transported by truck.

“It’s going to be an interesting springtime for farmers, too,” Schaefer said. Food prices are further affected by diesel prices because farmers use diesel to run their equipment.

Diesel prices in the past have been less volatile than gasoline prices, which can fluctuate wildly overnight. But that hasn’t been so for the past few years.

And the days when diesel fuel was priced lower than gasoline might be ending, too.

“It costs less when there is lower demand,” Schaefer said. “But diesel fuel has become a hot commodity.”

He said diesel fuel is produced from the same stock, a lesser grade of crude oil, as No. 2 heating oil. Demand for heating oil is up because of a colder winter on the East Coast.

In the world market, developing countries are using more and more diesel.

“China is sucking diesel fuel like crazy,” Schaefer said.

Although demand for diesel generally lessens during the warmer months, Schaefer said this year is a tough year to make projections.

“For the most part, I don’t think we’re going to see it this year,” he said. “Demand is down, but prices aren’t.”

He added that it “should be an interesting couple of weeks” in the trucking industry as registrations come due.

“We may have a few out there who hold off,” Schaefer said. “Somebody might have eight trucks and only renew six of them. They might wait until the second quarter. I’d guess we’re going to see a bit of that.”

He also said there may be “some guys who just park their trucks. They may say fuel prices are killing me and I’m not getting the rate I want.”

On the other hand, Schaefer thinks many more truckers may choose to move ahead.

“The bulk of the economy is in pretty good shape,” he said.

Chris Dettro can be reached at 217-788-1510.

$823.28 for a tank of gas
Al and Kathy Schlabach spent $823.48 for 203 gallons of diesel fuel for their 18-wheeler Monday evening at a Road Ranger Travel Station in Springfield.

The Wellman, Iowa, couple were transporting auto parts from Oscoda, Mich., to Kansas City, Mo., one of three routes they drive each week for Mike Brooks Inc. of Knoxville, Iowa.

“I used to pay cash for my fuel,” Al Schlabach said. “Six hundred dollars used to buy for a week, and now it costs more than that for one fill-up.”

The truck has a governor that limits it to going no faster than 65 mph to conserve fuel, and the tank holds 280 gallons.

“It’s putting a squeeze on the companies,” Schlabach said of the price of fuel. “They’re forcing us to be more efficient. There are restrictions on idling time and speed.”