Truckers in a bind as diesel costs rise
Posted on Friday, March 21, 2008
The timing of payments for hauling a load becomes more critical for some trucking firms with diesel fuel hovering around $ 4 per gallon.
On Thursday, prices for the fuel reached record highs of $ 4. 03 per gallon nationally and $ 3. 92 per gallon in Arkansas, according to AAA data.
Last year, diesel cost $ 2. 74 per gallon nationally and $ 2. 64 per gallon in Arkansas, according to AAA.
The state’s trucking association has asked federal lawmakers to investigate why prices are on a tear. The cost of diesel fuel has risen dramatically since mid-September, when prices surpassed $ 3 per gallon for the first time in the past year.
Unlike other operation costs, a trip to the pump is typically an immediate expenditure, while the corresponding shipper’s payment may not arrive for weeks.
While fuel surcharges can help alleviate the pain, rising prices have some carriers seeking expedited shipper payments, which remain the exception in the industry.
At least one third-party logistics provider is offering a type of “payment on demand” option to offset the cash-flow crunch.
“A fuel surcharge helps, but the problem is that fuel is rising nationally at such a rapid pace what we’re collecting is based on last month’s surcharges that are paying for today’s fuel prices, ’’ said Chuck Mitchell, the owner of MC Express Inc., which runs 93 trucks out of Jonesboro.
Average national prices for ultra-low-sulfur diesel fuel have jumped more than 20 percent over the past month, according to data from the Energy Information Administration, the federal government’s energy statistics department. Truckers paid $ 3. 98 a gallon for diesel Monday, compared with $ 3. 29 for the week of Feb. 11, according to the energy agency data.
Fuel surcharges vary among shippers and kick in only after an agreed-on price per gallon is surpassed. Typically, truckers set a “ base” rate per mile that covers expenses, including the amount paid for fuel. And they only get paid for loaded miles. James Bozeman, who owns J. M. Bozeman Enterprises Inc., a 48-truck outfit in Malvern, said fuel surcharges have not helped any carrier compensate for the dramatic weekly increases in the price of diesel.
We’re “at the point where fuel surcharges don’t cover our empty miles, and we passed that 20 cents a mile ago, ’’ Bozeman said.
While he hasn’t had to take any concessions on his rates, he said, his shipping relationships are a bit more tenuous since many shippers seek to take advantage of the soft rates available in the market.
Lower rates per mile are the result of factors such as weak freight demand caused by recession-stricken industries like residential construction, along with too many trucks in operation.
Alan Riels, the owner of Dedicated Logistics LLC, a 30-truck outfit out of Crossett, said expedited payments are not the norm, unless a carrier sells pending accounts receivable to a lender fronting cash.
However, Transplace, a thirdparty logistics provider with offices in Lowell, could change that.
Steve Crowther, chief financial officer of the Frisco, Texasbased business, said in October that the business had begun offering carriers a chance to speed up their cash flow.
“ The program is aimed at smaller and midsized carriers, ’’ said Crowther, explaining that the program is structured around a kind of revolving line of credit.
It’s a purchase card that comes with a variable 1 percent or 2 percent cost to access the expedited payment, he said.
A small proportion of Transplace carriers uses the card, but Crowther said the company has already made more than $ 1 million in payments since introducing the program.
Crowther said carriers hauling both “ dedicated” freight, which is consistent repeat business, and spot freight, which is more random, one-time business, are using Transplace’s payon-demand product.
Founded in 2000, Transplace is co-owned by five carriers, including J. B. Hunt Transport Services Inc., and provides supplemental sales, management and freight-movement services to large and small carriers.
“For anybody that’s stretched, it works out well, ’’ Crowther said.
Greg Carman, president of Carman Inc. in Fort Smith, said he’s paying about $ 30, 000 more this year to burn 23, 000 gallons of fuel needed to move his trucks during a seven-day period. Like other truckers, Carman Inc. ’s tight cash flow is why a quick turnaround on services provided by his 50-truck outfit is so important. Carman said he’s going through his cash reserves while waiting to collect outstanding receivables. “ It’s almost become more important to get a faster payment than it is higher rates, ’’ said Carman, the outgoing chairman of the board of the Arkansas Trucking Association.
The association said in a news release Thursday that it will ask Congress to investigate the record-high diesel fuel prices that are “ threatening the cost-effective flow of goods in the U. S. and the general economy.”
The board of directors at the Little Rock trade group voted Wednesday to seek congressional oversight hearings. The trucking association’s board includes representatives from companies such as ABF Freight Systems Inc. in Fort Smith, FedEx Freight in Harrison, P. A. M. Transportation Services Inc. in Tontitown and USA Truck Inc. in Van Buren. The group will send letters to the speaker of the House, leaders in the House and Senate and Arkansas’ congressional delegation. “ Congress should examine why supplies of diesel are plentiful, consumption is flat, yet the price keeps rising, ’’ association President Lane Kidd said in a news release. The state trucking association, an affiliate of the American Trucking Associations in Alexandria, Va., represents more than 400 carriers.
To contact this reporter: lwhalen@arkansasonline. com
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