PDA

View Full Version : Diesel Prices getting ugly


Mr. Laz
03-21-2008, 10:48 AM
Posted on Thu, Mar. 20, 2008 10:15 PM



Rising cost of diesel fuel has set off alarms in trucking industry

By STEVE EVERLY and RANDOLPH HEASTER

The Kansas City Star


<!-- START /pubsys/production/story/story_assets.comp --> <script language="Javascript"> function PopupPic(sPicURL, sHeight, sWidth) { window.open( "http://media.kansascity.com/static/popup.html?"+sPicURL, "", "resizable=1,HEIGHT=" +sHeight+ ",WIDTH=" +sWidth); } </script> <!-- photo or image available --> <!-- Start: /pubsys/production/story/assets/image_embedded.comp --> http://media.kansascity.com/smedia/2008/03/20/21/797-jk_diesel_graph_03-21-2008_6211VA8M.embedded.prod_affiliate.81.jpg (http://media.kansascity.com/smedia/2008/03/20/21/689-jk_diesel_graph_03-21-2008_6211VA8M.standalone.prod_affiliate.81.jpg)
<!-- End: /pubsys/production/story/assets/image_embedded.comp -->
<!-- Start: /pubsys/production/story/assets/image_thumbnail.comp --> http://media.kansascity.com/smedia/2008/03/20/21/50-diesel2_03-21-2008_IL11V0CK.thumb.prod_affiliate.81.jpg (http://media.kansascity.com/smedia/2008/03/20/21/375-diesel2_03-21-2008_IL11V0CK.standalone.prod_affiliate.81.jpg) <!-- End: /pubsys/production/story/assets/image_thumbnail.comp -->
<!-- Commenting out fact box for Jody Cox --> <!-- /mi/pubsys/story/asset_list, include_asset_type=>"factbox" -->
<!-- END /pubsys/production/story/story_assets.comp --> <table> </table> It could be worse for motorists paying record-high gas prices.

Don’t believe it? Ask a truck driver.


Gas prices are now at a national average of $3.28 a gallon this year. That’s plenty high, but nowhere near diesel’s average price of $3.97, according to the Energy Information Administration. Indeed, diesel prices have kissed $4.17 in some East Coast markets.
On average, diesel prices are now $1.29 higher than a year ago. Those prices could ease going into the summer before climbing again later in the year, and again focus attention on a fuel often overshadowed by the market for gasoline.


“Diesel is a bit of a sleeper, and it’s getting ugly,” said Steve Mosby, a vice president with Kansas City’s Admo Energy, which helps businesses purchasing fuel.
Higher fuel costs, which threaten to filter into higher consumer inflation, have already set off alarms in the trucking industry.


The Owner-Operator Independent Drivers Association, based in Grain Valley, has more than 160,000 members nationwide, and many of them are struggling, said Todd Spencer, the group’s executive vice president.


“We’ve been hearing from truckers that have stopped driving for more than three months,” Spencer said in a statement. “They’ve made the decision to not operate when it’s not economically profitable. We are encouraging members to be fully aware of all costs and expenses, and watch closely how this relates to what they should accept for taking a load.”


Some are hopping mad, alleging that oil and fuel prices are rigged and that they are paying the price. Every 5-cent increase in the price of fuel raises a trucker’s annual fuel cost by $1,000.
Lesley Duke, who owns his truck and was in Florida this week dropping off a load, paid $4.15 per gallon for fuel. He said it was the toughest he had ever seen the trucking business in a 28-year career, and he was squeezing out a living only because he didn’t have to make payments on his truck.


Major trucking companies such as Overland Park-based YRC Worldwide Inc. rely on fuel surcharges on customers to offset the higher costs. But YRC Chairman and Chief Executive Bill Zollars acknowledged Wednesday that the dramatic rise in fuel prices could prevent the overall economy from regaining momentum.
“I really worry about the long-term impact on our customers and their ability to stay competitive and pass on the higher transportation costs they’re seeing,” Zollars said at a meeting with transportation analysts in New York.


YRC operates the national less-than-truckload carriers Yellow Transportation and Roadway. The company also owns several regional trucking firms.


Zollars added that among the company’s approximately 3,000 customers under contract, only a small percentage had caps on their fuel surcharges.


Con-Way Inc., a YRC competitor, this month said it was reducing the maximum speed on its 8,400 trucks operated by Con-Way Freight, its less-than-truckload subsidiary, to save fuel. The company has reduced the maximum speed on the fleet to 62 mph from 65 mph, said Gary Frantz, a Con-Way spokesman.
That change is expected to reduce the carrier’s fuel consumption by nearly 3.2 million gallons annually, or about $10 million. In addition, the reduction in carbon emissions will be the equivalent of removing nearly 7,300 automobiles from U.S. highways.


“Fuel conservation and cost-savings aside, this speed reduction initiative will have the single largest impact on carbon footprint reduction of any operational or business practice change available to us,” John G. Labrie, Con-Way Freight president, said in a statement.



<!-- START /pubsys/production/story/story_assets.comp --> <script language="Javascript"> function PopupPic(sPicURL, sHeight, sWidth) { window.open( "http://media.kansascity.com/static/popup.html?"+sPicURL, "", "resizable=1,HEIGHT=" +sHeight+ ",WIDTH=" +sWidth); } </script> <!-- photo or image available --> <!-- Start: /pubsys/production/story/assets/image_embedded.comp --> http://media.kansascity.com/smedia/2008/03/20/21/797-jk_diesel_graph_03-21-2008_6211VA8M.embedded.prod_affiliate.81.jpg (http://www.kansascity.com/business/story/540451.html)
<!-- End: /pubsys/production/story/assets/image_embedded.comp -->
<!-- Start: /pubsys/production/story/assets/image_thumbnail.comp --> http://media.kansascity.com/smedia/2008/03/20/21/50-diesel2_03-21-2008_IL11V0CK.thumb.prod_affiliate.81.jpg (http://www.kansascity.com/business/story/540451.html) <!-- End: /pubsys/production/story/assets/image_thumbnail.comp -->
<!-- Commenting out fact box for Jody Cox --> <!-- /mi/pubsys/story/asset_list, include_asset_type=>"factbox" -->
<!-- END /pubsys/production/story/story_assets.comp --> In addition, Con-Way’s truckload division is reducing the maximum speed on its 3,000-truck fleet to 65 mph from 70 mph, Frantz said.


All YRC trucks have operated at a maximum speed of 62 mph for several years. Analysts have considered that speed a good balance between maximizing fuel efficiency and prompt delivery times.
The ripples of high-fuel prices are also hitting the airline industry and its customers. The price of jet fuel, a close relative of diesel, has also spiked higher than gasoline in recent months. The wholesale price of jet fuel in the Midwest hit a high on Tuesday of $3.33 per gallon, according to BloombergNews.


Airlines have added fuel surcharges of as much as $50 per round trip. And United Airlines on Wednesday said it was retiring 20 older 737s because they consumed too much fuel.


So, what’s going on?


Gasoline, diesel and jet fuel prices have all been boosted by record oil costs. On Thursday, the price of West Texas Intermediate crude declined $1.69 per barrel, closing at $102.79 per barrel. The high for the past year, $110.33, was reached last week.


The bidding on oil has been so extraordinary that on Monday, a barrel of crude oil cost more than a barrel of refined gasoline on the New York Mercantile Exchange — only a handful of times that has ever happened. Some analysts think the oil market has topped for now and prices could ease.


But the difference in price among gasoline, diesel and jet fuel has been mostly because of the refinery margins, which is the difference between crude oil costs and wholesale gas costs, and is a key indicator of refinery profits.


Last spring, gasoline margins that briefly topped $1 per gallon sent prices soaring. So far this year, those margins have been lower, and using the industry calculation that has West Texas Intermediate for the oil cost, those margins have recently been nonexistent. Refineries that use cheaper grades of oil have been able to do somewhat better.


Gasoline stockpiles have been up, in part, because of higher imports of the fuel. In addition, demand has been essentially flat. That, so far, has helped keep the refinery margins on gasoline in check.


“We’re swimming in the stuff,” said James Williams, an analyst for WTRG Economics.


The next few weeks could tell the tale for how much gasoline prices go up this year, since they are expected to peak this spring unless there are unexpected refinery outages later in the year. A federal report released Wednesday showed that gasoline inventories, while still higher than average, had declined somewhat, which could set the stage for an increase in margins. But demand is still flat in a weak economy.


If refinery margins do begin to climb and they are not offset by oil prices, expect higher prices at the gas pump.
As for diesel, its refinery margin was 61 cents per gallon this week. Diesel is refined from the same part of the oil barrel as heating oil, so diesel prices typically are higher during the winter. Stockpiles remain low because of demand. There have also been fewer diesel imports because of higher worldwide demand for the fuel.
So is there any hope for diesel prices to decline? If history is any guide, yes. Spring and summer are typically when refinery margins for diesel decline and retail prices also come down.


“That usually happens nine times out of 10. But is this the 10th?” asked Mosby of Admo Energy.
We’ll soon find out.


Longer term, diesel prices could still be higher than normal with tighter supply and demand. And that is a worry for the trucking industry.


Jim Johnston, president of the Owner-Operator Independent Drivers Association, in a recent letter to President Bush, urged that something be done to trim fuel prices.


“Mr. President, the hard-working truckers that drive the commerce of this country and make our nation competitive in the world marketplace need your support now more than ever,” he wrote.

To reach Steve Everly, call 816-234-4455 or send email to severly@kcstar.com (severly@kcstar.com).



To reach Randolph Heaster, call 816-234-4746 or send e-mail to rheaster@kcstar.com.

Mr. Laz
03-21-2008, 10:50 AM
"Trucking companies should just stop using diesel if they don't like the price .... it's their own fault" /Donger.

HonestChieffan
03-21-2008, 10:51 AM
They all went to surcharges for freight a long time ago.

Donger
03-21-2008, 11:31 AM
"Trucking companies should just stop using diesel if they don't like the price .... it's their own fault" /Donger.

ROFL

CHIEF4EVER
03-21-2008, 12:32 PM
If I didn't get a fuel surcharge added to each freight bill, I would be out of business. As of today, diesel was a DOLLAR more per gallon than gas. It is costing me almost $800.00 for 200 gallons of fuel to fully fuel up a truck. For those of you who think Dubya invaded Iraq for cheap fuel, survey says: Bzzzzzzzzzzzzzt! WRONG.

HonestChieffan
03-21-2008, 12:41 PM
At some point, the price will reach a point of self limiting consumption. The days ov SUV's, rec vehicals, and wasteful cars and trucks is coming to an end. We are the one of few places on earth to use the gas guzzler cars and trucks as we do.

Mr. Laz
03-21-2008, 12:52 PM
For those of you who think Dubya invaded Iraq for cheap fuel, survey says: Bzzzzzzzzzzzzzt! WRONG.
you are mistaking cheap oil for cheap gas

Deberg_1990
03-21-2008, 01:01 PM
At some point, the price will reach a point of self limiting consumption.

Question is, what is that magical price??

$4.00 a gallon?
$5?
$6?
$7??


Higher??

Donger
03-21-2008, 01:07 PM
Question is, what is that magical price??

$4.00 a gallon?
$5?
$6?
$7??


Higher??

Gasoline demand dropped 1% over the last four weeks. I'd say that for some, it's already there.

HonestChieffan
03-21-2008, 01:11 PM
for some

Hoover
03-21-2008, 01:16 PM
The first line of the story implies that only truckers pay for the high cost of diesel fuel. Not true, we will all pay the price at the grocery store and everything else we buy.

BigMeatballDave
03-21-2008, 03:56 PM
I just saw diesel a few days ago 4.08.

a1na2
03-21-2008, 04:27 PM
Gas in Big Sur, California, was reported last week to be at $5.20 a gallon.

No comment on what Diesel was running.

BigMeatballDave
03-21-2008, 07:45 PM
I just saw diesel a few days ago 4.08.4.19 today.

BigMeatballDave
03-21-2008, 07:45 PM
Gas in Big Sur, California, was reported last week to be at $5.20 a gallon.

No comment on what Diesel was running.5.20 for gasoline? You sure that wasn't for diesel?

BigMeatballDave
03-21-2008, 07:52 PM
5.20 for gasoline? You sure that wasn't for diesel?Nevermind, I googled. Sucks for them.

SBK
03-21-2008, 08:42 PM
4.19 today.

Same as here in Atlanta. :eek:

ROYC75
03-22-2008, 01:34 AM
They all went to surcharges for freight a long time ago.

This is true, but some warehouses, shipping companies still don't want to pay for it and refuse to in some ways. If you charge them for it and you don't have it in a written contract, they don't have pay it. Some of them will only go up a small percentage of what you want to charge them.

Getting a small company to sign fuel surcharge contract now is almost impossible. They fear of the rising cost of fuel and fearful of not being competitive with their own competition within their own field.

I know I have a few customers that I do not have a FSC with and I just tell them, when the price goes up on fuel, so does the cost of transporting it. Without a FSC contract on hand, I send them a rate confirmation to sign before ever sending them a truck.

On the FSC contracts we have, we always have to check it each week to adjust the rates, this is an accounting nightmare, but it must be done.

American shippers have been screwing the truckers for years.

Then you will get some trucking companies or brokers that does have the FSC contracts that sometimes do not pass this FSC revenue to the trucker ( which is illegal ) and pocket the revenue to themselves. They hide it within the linehaul rate by reducing the linehaul and showing the FSC .

In many ways, the truckers are alot like farmers, they get screwed in so many ways and yet the country and the consumers rely on them.

CHIEF4EVER
03-22-2008, 07:11 AM
This is true, but some warehouses, shipping companies still don't want to pay for it and refuse to in some ways. If you charge them for it and you don't have it in a written contract, they don't have pay it. Some of them will only go up a small percentage of what you want to charge them.

Getting a small company to sign fuel surcharge contract now is almost impossible. They fear of the rising cost of fuel and fearful of not being competitive with their own competition within their own field.

I know I have a few customers that I do not have a FSC with and I just tell them, when the price goes up on fuel, so does the cost of transporting it. Without a FSC contract on hand, I send them a rate confirmation to sign before ever sending them a truck.

On the FSC contracts we have, we always have to check it each week to adjust the rates, this is an accounting nightmare, but it must be done.

American shippers have been screwing the truckers for years.

Then you will get some trucking companies or brokers that does have the FSC contracts that sometimes do not pass this FSC revenue to the trucker ( which is illegal ) and pocket the revenue to themselves. They hide it within the linehaul rate by reducing the linehaul and showing the FSC .

In many ways, the truckers are alot like farmers, they get screwed in so many ways and yet the country and the consumers rely on them.

Good post. The more astute truckers can avoid getting screwed by brokers on their fuel by simply doing the math based on the national fuel cost average and being selective irt what the pain threshhold is on the linehaul amount they will pull freight for. The problem with a lot of truckers is that they look at the offerings too simplistically and simply add the 2 amounts together to arrive at a decision rather than looking at each one seperately to determine if the rates on BOTH are right. Unfortunately, they are sometimes at the mercy of unscrupulous brokers in bad freight areas and will accept just about any offering to get out of that area. Take refrigerated drivers for instance. Loads into the Northeast pay really good but rates getting out of the Northeast are pure shit. Yet a trucker can't just sit there in the Northeast for days on end waiting for just the right load so they will accept just about any crappy deal they can find to get back to greener pastures. Unscrupulous brokers take advantage of this situation without mercy.

Bill Parcells
03-22-2008, 07:38 AM
This is ridiculous price gouging due to the fact that diesel is also used as heating oil. it's easier and cheaper to make diesel, but it's more expensive than gas? :spock: this directly effects me. I bid contracts out 3 years ago when diesel was $1.29 a gallon. that's almost a 300% increase for what? :Lin:

ROYC75
03-22-2008, 09:36 PM
Good post. The more astute truckers can avoid getting screwed by brokers on their fuel by simply doing the math based on the national fuel cost average and being selective irt what the pain threshhold is on the linehaul amount they will pull freight for. The problem with a lot of truckers is that they look at the offerings too simplistically and simply add the 2 amounts together to arrive at a decision rather than looking at each one seperately to determine if the rates on BOTH are right. Unfortunately, they are sometimes at the mercy of unscrupulous brokers in bad freight areas and will accept just about any offering to get out of that area. Take refrigerated drivers for instance. Loads into the Northeast pay really good but rates getting out of the Northeast are pure shit. Yet a trucker can't just sit there in the Northeast for days on end waiting for just the right load so they will accept just about any crappy deal they can find to get back to greener pastures. Unscrupulous brokers take advantage of this situation without mercy.

This is true on all the coast lines....... You go to the west coast, you have to come east or stay north and south, they have you by the balls and set their prices low enough that somebody takes it because they do not want to sit and wait.

Same thing on east coast ......... it doesn't matter if it is vans, reefer freight, flatbeds, OD loads, or heavy haul. The shippers refuse to pay the rate, some dumbass will come along and take the load.

Northeast sucks, it cost more to operate, fuel, toll roads, toll bridges plus the rates are horrible.

From our base here in KY, we get a premium price to go east or west because of the suffering low prices on return loads. The midwest shippers and suppliers are complaining that it's hard to compete against the east and west coast shippers because they ship at a lower cost.

A former potential customer wanted me to give him " backhaul rates " from certain locations. I asked him why, he said because of the shipping cost and their was no where to go and nothing else to haul in that area for miles. I told him the operational cost for trucks is the same per mile going east as it is west and vise versa, same as north and south. You just can't go around the country all directions with cheap freight.

I have a guy that I help, I find his loads and dispatch him for a small fee. His operational expense, fuel, taxes, oil,maintence, truck payments, tags, insurance is $ 1.30 cpm. That is BREAK EVEN COST. This doesn't cover his wages or topay a driver's wages, which run around .35 cpm.. To make a profit you need at least a 30% profit above your operational cost , $ 39 - 40 cpm.

Too many times the shippers are wanting the drivers or owner operators to run on their own good fortune of not breaking down , thus lowering the shipping cost but putting the trucker in harms way of a repair or breakdown and creating a lost profit margin on the trucker on that load. If he takes the load, he is at risk and the shipper doesn't care, he got his load moved cheaper.

In 1977 when Congress deregulated the transportation industry, I owned my 1st truck. I grew up around them all my life,that was all my dad did for a living. I was at the old Metro truckstop off the I-70 viaduct and told a bunch of truckers then that today is the day that the trucking industry will start it's decline and go down hill, making it harder for trucking companies and owner operators to stay in business. Here I was , all of 20 years old and they laughed at me, thinking it had more to do with the railroad industry than for trucking.

Doing away with tarriffs was going to make it more competitive for the truckers, creating more jobs ! Doing away with the tarriffs took all the profit out of the trucking companies and put the control of shipping cost into the hands of the shipping industries. Creating the lack of profit to the trucker and allowing the savings to the shippers.

Soon the union LTL compaines were going out of business, long haul TL companies were struggling to make a profit. This was all while the fuel was low, in the 1980's. Now that fuel is shy high, it's even worst today ..........

THE SINGLE WORST MOVE BY CONGRESS AFFECTING THE TRANSPORTATION INDUSTRY. TRANSPORTAION DEREGULATION

Sponge Bob
03-23-2008, 06:54 PM
Glad I have to rely on salt water.

Braincase
03-23-2008, 10:29 PM
Anybody wanna bet that WalMart tells all of their trucking/shipping partners that they need to eat the costs?

Anybody wanna bet that as soon as that happens, that dispatchers at all the major truck lines will lost WalMarts number, or enough pressure will come to bear that unless there's a drop in fuel prices, that WalMart will close down the Riyad Sam's Club?

OK, I'm BSing on the last one, but the first one, you can just about bet on.