Truckers, taxis hurt by surging gas prices

seattle.bizjournals.com From the March 14, 2003 print edition Steve Wilhelm Staff Writer

As fuel prices climb, local transportation companies are trying with varying success to pass the increased costs on to customers.

Both fleet managers and independent operators such as taxi drivers say the increased fuel prices are compounding their problems from the slow economy. Their margins are being squeezed between higher costs and struggling customers who are unwilling to pay more.

"I don't know how much the customer is going to take," said Ed Vanderpol, who is president of Seattle-based trucking company Oak Harbor Freight Lines as well as president of the Washington Trucking Association. His company, with a fleet of 450 trucks, is tacking on to all bills a fuel surcharge of 7 percent, the highest he's ever charged.

"I think there are some carriers out there that are hurting," Vanderpol said. Coming on top of rising workers compensation and liability insurance payments, he said, the higher fuel prices are "killing us."

This week, statewide regular gasoline prices were up 57 percent from a year ago, to an average $1.85 a gallon, while diesel prices were up 54 percent to $2 a gallon, according to the American Automobile Association. The increase results from reduced production in Venezuela, anxiety about a war in Iraq, and stockpiling by oil companies to buttress low inventories. .

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Unlike unregulated cargo carriers such as Oak Harbor Freight, some transportation companies cannot pass on their costs to the customer. Many passenger-carrying companies must have their rates approved by regulators, and any increases are lagging behind the fast-rising fuel costs.

Seattle's 1,500 taxi drivers, who haven't seen a basic rate change since the early '90s, are perhaps the hardest hit. Now drivers are paying $5 to $10 a day extra for gasoline at a time when the recession has deeply slowed their business, they're struggling to make ends meet, and they want to add a fuel surcharge to the basic $1.80 per mile that passenger pay.

One downtown Seattle driver, who asked to be identified only as Hassan, said that some days he only gets four clients, instead of a dozen back when the dot-com economy was booming. He rents a taxi for $50 a day and now must spend another $25 for gas, so some days he only clears $20, or even loses money.

Driver Tom Stull, who drives "nearly every day," said he'd welcome a surcharge. "That would help pay for the gas, of course," he said.

Terry Davis, a driver who is also acting director of the Cab Drivers' Alliance of King County, said his organization will be asking the city to swiftly enact a per-trip surcharge of 50 cents to 60 cents.

"The drivers are hurting. We are independent contractors, and we just cannot raise rates like everybody else can," he said.

Airporter companies, which run vans to Seattle-Tacoma International Airport, are also struggling with the rapid gas-price increases.

John Rowley, vice president and general manager of Seattle-based Shuttle Express Inc., said the Washington Utilities and Transportation Commission on Feb. 25 granted his company a 50-cents-a-person surcharge starting March 1. But additional fuel price increases since then have forced his company to go back for an upward adjustment.

Shuttle Express operates a fleet of 100 Dodge vans and 20 Lincoln Town Cars, consuming 60,000 gallons of fuel a month, Rowley said. He estimated the increased fuel prices are costing his company $20,000 a month.

"We hope the UTC will agree we should be recouping all of that difference," he said.

Unregulated carriers, while free to adjust surcharges as they wish, are constrained by the intense competition for cost-conscious customers.

On March 3 Seattle-based Airborne Inc. added a 5.1 percent fuel surcharge to its express shipments, while Alaska Air Group Inc. has added a $10 per-passenger surcharge for flights not on sale.

Federal Way-based Totem Ocean Trailer Express Inc., which moves ocean cargo between Tacoma and Alaska, in early February filed to increase an existing fuel surcharge to 6 percent of the ocean freight rate, from 5 percent.

Totem's vice president of sales and operations Jeff Keck said he's carefully watching the prices being charged by competing barge and truck services.

Other carriers are being squeezed between opposing forces.

Harbor Freight Lines Inc. on March 1 enacted a 6 percent fuel surcharge to help cover the increased costs of the owner-operators who drive company trailers to Seattle's waterfront to pick up ocean containers. The problem, said operations manager Richard Hill, is that the ocean carriers aren't all willing to pay his company a surcharge to pass along the expense.

"Some steamship lines are offering 5.5 percent, some are offering 2 percent or nothing," Hill Said. The discrepancy is eroding Harbor Freight's margins, but Hill feels he must fully compensate his drivers or risk losing them.

"We do have a bunch of good guys," he said. "The margins are so small for them and for us anyway."

Clipper Navigation Inc. already has added a $1 fuel surcharge each way for the unregulated route between Seattle and Victoria, B.C., and general manager Darrell Bryan plans to double that March 15.

With the company's diesel-driven vessels burning 500 gallons of fuel an hour, and its turbine-driven Clipper IV burning 1,600 gallons an hour, Bryan estimated the increased fuel prices will boost expenses by $700,000 this year. He's already spent more than that on new government-required security-related equipment and infrastructure.

"With increased security costs, added onto increased fuel costs, that will add a lot of challenges for small boat operators," he said.

Reach Steve Wilhelm at 206-447-8505 ext. 113 or swilhelm@bizjournals.com.