Rising cost of diesel hits truckers

www.amarillonet.com Web posted Friday, March 14, 2003 5:10 a.m. CT By GREG ROHLOFF grohloff@amarillonet.com

With the price of diesel fuel rising for the eighth week in a row and setting its fourth straight record high, the trucking industry is feeling a pinch that is costing jobs.

The squeeze is not yet showing up in the Consumer Price Index, which measures inflation, but Bob Costello, chief economist of the American Trucking Association, said rising prices for goods hauled by truck is just a matter of time.

The Energy Information Administration said in its weekly update Tuesday that the nationwide average stands at $1.771 a gallon for diesel fuel, or 1.8 cents higher than a week ago.

The highest prices are on the coasts, with the East Coast particularly hard hit because of lingering winter weather driving up demand for home heating oil.

Costello said refiners have been squeezed two ways - the rising cost of crude oil because of political turmoil in Venezuela and the looming war in Iraq, and the increased demand for fuel oil on the East Coast.

Fuel oil, like diesel, is a distillate refining product. When production of home heating oil rises, diesel production declines.

The average price nationwide for diesel a year ago was $1.10 a gallon, with $1.20 a gallon on the coasts, said Rusty Dillon of Groendyke Transport, chairman of the Texas Motor Transport Association's Amarillo chapter.

The Energy Information Administration said diesel costs $2.001 a gallon on average in New England, while the West Coast price rose to $1.886 a gallon.

The Gulf Coast region, which includes all of Texas, was the only region to see a decline this week, the agency said, dropping about a third of a cent to $1.697.

That provides little comfort to truckers Robert and Jerry Branum, operators of Branum Trucking north of Canyon. The company, in operation since 1973, hauls boxed beef and pork and groceries for Affiliated Foods.

Fuel costs for a typical 500-mile haul have risen $60 since diesel fuel prices started rising eight weeks ago, Robert Branum said.

Branum Trucking has collected a surcharge of 8 cents per mile on its loads, but the fuel price increases work out to about 16 cents a mile.

Robert Branum figures that he can operate his trucks about three more months with the current losses. After that, he says, he will park them until the price of diesel fuel falls.

"Everything is about the fuel," he said.

Such a move, though, would be made not from financial weakness, but from strength, he said.

The last time diesel prices rose rapidly, in spring 2001, Branum Trucking operated 25 trucks. Now, Robert Branum said, the company operates six trucks and contracts with seven drivers.

Weaker independents have folded since the May 2001 peak prices, he said.

Since then, earnings have been strong enough to allow the company to wait out the fuel cost increases.

While he pays for the difference in the fuel surcharge and the actual cost increase for his six trucks, the contract drivers are owner-operators who pay for the costs themselves.

Dillon said the larger companies such as Groendyke, which runs 23 tractors from its Amarillo terminal and 850 nationwide, are able to negotiate better terms for a fuel surcharge than independents.

The effects of rising fuel prices have not been calculated, but Costello said the organization estimates that for every 10-cent increase in fuel price, 1,000 failures occur among companies with fleets of five or more trucks.

The toll could be heavier among independent owner-operators, he said.