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Small trucking companies squeezed by soaring diesel prices

Rapidly rising diesel fuel prices this month are straining freight companies and their customers, and leaving small trucking operators struggling to catch up with escalating costs.

Independent operators and smaller fleets are the most exposed to record high diesel prices, as they have less influence over shippers and find it harder to match fuel surcharges with rising tariffs at the pump.

“It’s been tough,” said Derek Crusenberry, business development manager at JSG Trucking Co. in Acampo, Calif., which has 20 trucks hauling lumber, steel, cans and other goods up north. from California. “We had to find ourselves dipping into our margins to support operations, to turn the wheels, literally.”

In freight rate negotiations, shippers JSG works with have been slow to accept price increases that match diesel, forcing the company to delay repairs and other expenses, he said.

The dramatic increases exceed their ability to pass on the additional costs.

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Prices for diesel, the fuel used by truckers and in a swath of industrial operations, soared more than $1.10 a gallon in the two weeks immediately following Russia’s invasion of Ukraine. The invasion threw global energy markets into turmoil and sent crude prices soaring.

The national average price of $5.25 per gallon the week of March 14 was the highest on record by the U.S. Energy Information Administration since 1994, and the jump of nearly 75 cents per gallon at the start of the month was the largest ever one-week gain. Even a pullback to $5.13 a gallon for the week of March 21 left the national average price up more than $1.50 year-to-date.

Rising prices at the pump are adding hundreds of dollars a week to the operating costs of each truck, and carriers are scrambling to keep up.

Trucking companies use fuel surcharges to cover fluctuations in diesel prices, and those surcharges have risen to an average of 43 cents per 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 fall before the surcharge catches up.

A. Duie Pyle Inc., a West Chester, Pa.-based less-truck hauler with 1,800 trucks serving the Northeast, said it completed a 500,000-gallon storage tank, up from 70,000 gallons of diesel, just ahead of Russia. invaded Ukraine, a big advantage that somewhat insulated the company from sharp and sudden price swings.

But now the carrier is adjusting its fuel surcharge mechanism to account for diesel prices well outside the scale set several years ago.

“No one imagined back then that we could see diesel costs above $5 a gallon,” said Peter Latta, president of A. Duie Pyle.

The price of diesel in the Mid-Atlantic region that includes the company’s service area was $5.47 per gallon the week of March 14, according to EIA figures, up more than $2 per compared to a year ago.

“The speed of the increase has really been spectacular,” Mr Latta said, but added that so far customers “have been very understanding”.

Large carriers typically have lines of credit and working capital that provide a financial cushion, so even if they get paid 30 or 45 days after moving the loads, “whatever pain you’ve been through today , it is repaired in a few months”. said Avery Vise, trucking analyst at FTR Transportation Intelligence.

“But a small carrier, even if they get surcharges, if they don’t get paid that surcharge for a month or a month and a half, they’ll have to float that difference in the meantime,” he said. declared. noted. “And that’s potentially problematic.”

Small operators are adapting their operations to save fuel, taking measures such as limiting idling and reducing speed. Some are even turning away from longer loads to focus on shorter trips to cut expenses, industry executives have said.

Sadaya Morris, a truck owner operating in the Northeast as Pink Transportation LLC, said his fuel expenses dropped from about $250 a week to about $400 the week after the invasion. Ukraine by Russia. She has since shifted her business from freight brokers – intermediaries who Ms Morris says can be stingy in passing on fuel surcharges – to working more directly with customers.

Weekly fuel costs at Superior Modular Transport Inc., a fleet of 11 trucks based in Stockton, Calif., have increased by about $10,000 a week from typical expenses, President Daniel Titus said, and drivers of the platform company work 10 to 20 hours less. a week because customers balk at the higher fees.

“At the end of the day, if this continues, we may eventually have to park trucks,” Mr Titus said. There’s been a “shock factor,” he added, as Superior’s customers tell the carrier they can’t pass the higher cost of moving freight onto their own customers fast enough to keep up with the price increase.

Average diesel prices in California are the highest in the country. At about $6.22 a gallon the week ending March 21, the statewide price was nearly $2.24 a gallon higher than a year ago.

Michelle Kitchin drives a refrigerated truck between California and Michigan for midsize operator Van Eerden Trucking Co., based in Byron Center, Michigan. She drives slower to save fuel, but must balance the need to save money with meeting delivery deadlines, in addition to legal restrictions on the number of 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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