How are Rising Gas Prices Affecting the Trucking Industry
First off, Why?
“What’s up?” “Gas prices,” and a talk ensues of how your wallet can’t handle much more of this. The U.S. is no stranger to price hikes at the pump with the ebb and flow of the economy but this time around we have two main causes that aren’t the usual suspects.
If we’re moving in chronological order, the first culprit would be the pandemic. While people stayed home the demand stayed low so there was no real rush to produce. Then comes the imbalance of those returning to work while others either choose not to or have lost jobs, leading to a disruption in the global supply chain alongside a healthy dose of inflation. Now that more people are returning to their regular commutes the demand stays on a continuous, incremental rise. A simple lesson in supply and demand would tell you that this was going to happen and would normally hit a plateau eventually but hold on to this bit of information and buckle up for the next piece.
If we think on a global scale, just like everything we purchase, fuel prices follow supply and demand, naturally. Enter the Russian invasion of Ukraine. Economic sanctions from both the U.S. and the European Union being placed on Russia have started to choke the supply. While the U.S.’s main import of oil comes from Canada, the U.S. has remained one of the top 3 fuel suppliers of the world for the past twenty years. You may have heard that the U.S. only imports about 3% of its crude oil (needed in order to produce fuel) from Russia. While that’s true, that 3% is considered crucial in order for us to produce since our refineries are not designed to use the type of crude oil we have access to. This has a direct correlation to the number you see that seems to rise just a little more each morning as you pass your corner gas station.
How is this affecting the American trucker?
Everyday truck drivers have to fuel up almost daily and with diesel already a higher cost than regular fuel, you bet its price hikes are hitting the transportation industry the hardest.
Trucking covers 70% of the U.S.’s freight tonnage and is necessary to keep the economy moving. The diesel price hikes are causing headaches for not just the trucking companies but their shippers and customers alike. Inflation is hitting all corners of the industry and thus shipping rates are going up to compensate for the fuel it takes.
Some companies are having to delay loads to even out the costs. The companies most impacted are the small carriers that must foot the fuel bill upfront and wait to see that money again days and sometimes weeks later, (for those unfamiliar with costs of filling a truck, we’re looking at a current average of $650-$820 fuel bill per fill up). Every company, big or small, is different and has to do what is best for themselves and their customers. Sometimes that means losing out on loads because the cost of fuel would cancel out any profit while other must increase their rates in order to break even let alone make a profit.
Trucking companies across the country are feeling the squeeze and with no immediate plan set in motion to help ease these hikes, everyone is looking to do what they can to save at the pump and mitigate loss of business.
So Now What?
To put it plainly, we haven’t seen the worst of it yet. Most experts predict the rise will continue for a few more months as apposed to days and weeks like we’ve seen in the past. GasBuddy, an app to help drivers find the best deal for gas, estimates that the peak will come back down slowly after May but no guarantee. In order to start seeing prices go down, production would need increase from somewhere and likely would need to happen within the U.S. to see any immediate improvements.
For now, the best thing to do is not to drive more than you need to and take advantage of fuel point programs at truck stops and grocery stores wherever you can. Read more here for more tips on how to save on gas.
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