Posts Tagged “fuel prices”
By Brandon Huebler, Transportation Intern, ALC Cleveland
One of the current, major transportation issues is rising fuel prices, surging from the lack of Russian oil and high inflation. The average price per gallon for diesel has almost doubled, in the past year from $3.24 to $5.77, leaving the transportation industry scrambling. There is plenty of uncertainty within the industry regarding where prices will go. How much will the rising prices actually affect freight rates? More drivers have been asking for fuel advances here in the Cleveland office. So, it would seem that the diesel rates could be affecting the freight rates in many cases.
This rise in fuel prices hurts every industry though, not just the transportation industry. One example of an industry that is being indirectly affected by rising fuel prices and high inflation is the food retail industry. Studies show that grocery store food prices have increased 8.8 percent from the same period last year.
In looking at the USDA site regarding food prices, they cited the following specific increases – fresh fruit prices between 8.5 and 9.5 percent, cereal and bakery product prices between 7.0 and 8.0 percent, nonalcoholic beverage prices between 7.0 and 8.0 percent, and other food prices between 7.5 and 8.5 percent. In a move made by the current administration, a federal tax holiday will remove the 24-cent tax on diesel fuel.
What effect this will have on overall transportation costs is yet to be seen. The reality is that when the cost of moving freight increases, the cost of the items that are being moved will become more expensive.
Remember only a few summers ago when produce trucking rates from California to the East Coast were hitting $10,000? It hasn’t even come close to that in 2015 – and there appears to be a number of factors why.
As we head towards the Labor Day weekend final shipments to receivers for the holiday are now underway, if not already delivered. Don’t expect major rate increases.
East bound coast to coast rates in the summer of 2014 that were in the $8000 range are closer to $6500 this summer.
Here’s my take on why produce trucking rates are off.
***Less California Produce Volume. The 5-year California drought is beginning to take its toll on agriculture and it’s going to get a lot worse unless the El Nino weather pattern in the Pacific Ocean changes things this winter.
The San Joaquin Valley is being hit relatively hard by the drought and it is adversely affecting volume on many crops ranging from cantaloupe and honeydew and other melons to stone fruit, tomatoes and citrus. In the Salinas Valley, which has not suffered from the drought as much as in the San Joaquin Valley, all types of lettuce volumes have been like a roller coaster this summer.
The highest rates from California to the East Coast this year have been in the $8,000 range, and those were only for a limited amount of time.
***Rail Competition. While the railroads provide only limited competition, it still has an affect of produce trucking rates. After all, the rail rates are based trucking rates and often offer 10 to 15 percent less to haul. Still, we’ve seen a couple of rail related companies go out of business this year. The railroads have a history of dropping produce related services for other, less perishable products.
***Rules and Regulations. The insanity of excessive rules and regulations from both the federal and state levels continues, and it is having disasterous effects on owner operators. Rates are not keeping up with increasing costs of operations, although lower fuel prices have helped. Still, when you have the California Air Resources Board and their emission standards and other business killing rules, plus the feds pushing to implement Electronic on-board Recorders, not to mention many others, it all adds up.
***Qualified Drivers
The lack of qualified drivers continues to be a problem, although it could become a lot worse when the economy turns around. Attracting young people into the trucking industry continues to be a challenge. It’s a hard life and there’s certainly easier ways to make a living.
***Mexico. Over the past 20 years more and more produce is being grown in Mexico, and much of it is being driven by investments from American farming operations. Mexico has cheaper labor and less government interference in their operations. At the same time there is less produce being grown in California — Bill Martin.
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Much of the USA is sizziling in triple digits and number 2 diesel prices, while not at record levels, are still high enough to make it difficult for 
a lot of owner operators and small fleet owners to make ends meet.
For example, the Flying J Truck Stop here in Grand Forks, ND has number 2 diesel fuel for $3.83 per gallon. That is above the national average for diesel this week, which is at $3.79 per gallon.
Duane Riendeau, 65, was an owner operator for 32 years. Five years ago he became a company driver for Troy Pecka Trucking Co. Inc. of East Grand Forks, MN. He sold his equipment stating trucking has become “too costly” with all of the government regulations and with the price of diesel fuel pushing $4 per gallon. He knows several owner operators personally who are just barely making it, because freight rates are not keeping up with costs of operation.
Although Randy Boushey of A&L Potato Co. Inc. in East Grand Forks, MN still has his CDL and continues to own three 18 wheelers, he only uses his trucks for deliveries within a 300-mile radius. His potato packing and shipping company has customers well beyond the 300-mile radius and he sees more late deliveries due to aging equipment with mechnical problems. He cites high fuel costs as one of reasons truckers are delaying replacement of tractors and trailers.
It seems there’s alway excuses for diesel fuel being higher than it should be, despite Americans reducing their fuel consumption. Whether it is problems with refineries in Illinois and Indiana cutting their out put, or economic woes in Europe, crazies in the Middle East pulling their stupid terrorist stuff, or any number of other factors – the reasons seem very few for prices to drop.
The experts and observors of oil prices are genenerally saying diesel prices will only go up until after Labor Day, before it starts dropping; unless of course some idiot in Syria, Timbuktwo, or someplace else does something which may not even be remotely connected to the price of oil. But that doesn’t seem to matter.