My favorite part of this story, just tells me this is just one big cost passing on orgy. It feels so good at the moment, because there's fully fed funded (F3IP) inflation money everywhere.:
"I think the fundamental fact is that most customers are so happy to have a growing economy that fuel costs are one of the last things they worry about," Yellow Chief Executive Bill Zollars said .
Reuters
Economy, fees shelter top U.S. truckers from fuel pain
Thursday June 3, 3:57 pm ET
By Michael Connor
MIAMI, June 3 (Reuters) - Big U.S. trucking groups, which are enjoying surging demand from shippers, are feeling little of the sting from the dramatically rising diesel fuel prices tormenting independent truckers.
U.S. diesel prices, which have shot up 16 percent this year, raise truckers' costs by $300 million a year for each penny rise in the per-gallon price, according to the American Trucking Associations (News - Websites) trade group.
But the biggest truckers in the $610 billion-a-year road-hauling sector, such as Yellow Roadway Corp. (NasdaqNM:YELL - News) and Schneider National (News - Websites) Inc., pass on much of the added expense to customers in fuel surcharges and higher haulage rates.
"I think the fundamental fact is that most customers are so happy to have a growing economy that fuel costs are one of the last things they worry about," Yellow Chief Executive Bill Zollars said in an interview.
The trucking sector is coasting along with the expanding U.S. economy and in April touched a new all-time high in volumes, which rose 2.1 percent above March's volumes, according to ATA. Capacity among truckers is generally considered tight.
But small operators, which sometimes run as few as one or two vehicles and number in the hundreds of thousands, typically work on fixed contractual rates and must absorb the extra spending on diesel, according to executives, economists and analysts.
Independent truckers have blocked roadways and staged other protests against high fuel prices around the country, including California, where diesel costs are about 50 cents a gallon above the U.S. average of about $1.75 a gallon.
Many small operators are being forced out of business, with one industry rule of thumb being that a dime's rise in a gallon of diesel knocks out 1,000 truckers.
Just last month, USF Corp. (NasdaqNM:USFC - News) folded its money-losing Red Star trucking division.
The average price for fuel is up 32 cents from a year ago, according to ATA.
"It is hurting the industry, despite the fact the big companies are getting surcharges," said staff economist Tavio Headley at the ATA. "The smaller ones, even if they do get a surcharge, are not getting as much."
Even the big truckers report they are not getting every penny back. Surcharges typically do not cover costs for rebasing trips without cargoes or fuel used in equipment other than trucks. Lags between market rises and increases in surcharges also add to truckers' costs, executives said.
"There's never 100 percent recovery," said Christopher Lofgren, chief executive of Schneider National, which is privately owned and the biggest U.S. truckload carrier with some 15,000 trucks. "It's about two-thirds."
Few leading truckers hedge against rising diesel prices but many do buy fuel in bulk and look for other economies in buying what is a top operating cost. A typical tractor-trailer holds about 300 gallons of fuel and gets 5 miles to the gallon.
"It takes a little longer every day to find the best price," said spokesman Ira Rosenfeld of Overnite Corp. (NasdaqNM:OVNT - News), a trucker spun off last year by Union Pacific Corp. (NYSE:UNP - News).
Executives said customers see the same fuel price rises they do and grudgingly accept the surcharges. Some customers, however, appear to be consolidating loads, in part to save on transport costs.
"They understand," said Wes Frye, chief financial officer of Old Dominion Freight Line (NasdaqNM:ODFL - News), which buys 4 million to 5 million gallons of fuel each month. |
