High diesel prices squeeze truckers

Independent drivers have been hit especially hard, and some will be forced out of business.

Mark Thomson
Hard times: Milton Gaines of South Carolina owns his truck. With diesel prices more than $4 per gallon, he says, 'I can hardly pay my bills.'

Bob Campbell no longer idles his truck while he sleeps to keep the heat or air conditioning on: The fuel it burns is too valuable. "You either freeze or you burn up," he says with a shrug.

Still, he's getting by, which is more than Richard Wood, who's eating fried chicken near Mr. Campbell at the Flying J Truck Stop in Gary, Ind., can say.

Mr. Wood lost his truck last month when he could no longer afford the payments due to the spike in diesel prices. Now he's back to driving for a company.

"In six months, everybody operating on a shoestring will be gone," says Campbell, celebrating his birthday with a senior egg breakfast. "If I had a truck payment, I'd be hurting."

While all Americans are facing sticker shock at the pump these days, truckers have been hit particularly hard, watching the cost of diesel skyrocket past gasoline. The national average for diesel is hovering just above $4 a gallon, due to high crude-oil prices and rising demand for diesel, especially in China and Europe. Truckers often pay close to $1,000 to fill up a tank that might have cost $600 to fill a few years ago.

Independent truckers – those, like Campbell, who own their own rigs – are the ones being hit the hardest. They make up roughly a third of truckers. With little pricing power or ability to collect fuel surcharges, many of them are accepting hauls that barely allow them to break even or that even lose money. Conditions are bad enough that a week ago, some truckers tried scattered protest attempts – strikes, slow drives to tie up traffic, or drives to state capitols – which largely fizzled due to the unorganized nature of the industry.

"The reason it's such a big issue isn't that the price is $3.50 or $4, but that it went up so quickly," says Peter Swan, a professor of logistics and operations management at Pennsylvania State University in Harrisburg. As far as independent truckers go, he says, "there will be some that will go under, and some will quit working until things get better.... It's a bad situation. If I were a driver and could do it, I'd sit out for a while."

That's what a few tried to do in an organized way on April 1, when the scattered calls for a strike led to several hundred truckers sitting out in protest or slowing to a crawl on the New Jersey Turnpike. The strike efforts did prompt a few news stories, but the efforts had little effect, and few truckers said they could afford to join in.

It was also unclear just what effect they hoped to have: Some asked for state fuel taxes to be repealed, while others hoped to put pressure on the federal government to tap into national oil reserves to help lower prices.

Still, some independent truckers are moving forward with more efforts. They're planning a rally in Washington at the end of this month that would include themselves and others affected by high fuel prices. If nothing gets
accomplished then, they're suggesting another strike for May 5.

The Owner-Operator Independent Drivers Association says it doesn't think strikes are the way to go. Instead, it is pushing for legislation that would require shippers to pay truckers a fuel surcharge and that would make the transactions between brokers, shippers, and independent truckers more transparent.

Currently, many drivers get some surcharge to cover rising fuel prices, but rarely all of it. Some shippers balk at paying one at all.

"The independent trucker doesn't have anybody on their side to help them recover costs," says Larry Daniel, president of America's Independent Truckers' Association, which is also advocating a mandated fuel surcharge. "As much as I hate government intervention under normal conditions, these are not normal conditions."

Many drivers, for instance, are desperate enough that they'll accept a price that doesn't even cover their costs, in hopes of getting somewhere where they can get a better load.

Still, most experts say such a mandate is both unlikely and tricky to impose in a contract situation.

"The free market will deal with it," says Aaron Gellman, founder of Northwestern University's Transportation Center in Evanston, Ill. "If the market will stand a fuel surcharge, so be it."

Eventually, say Mr. Gellman and other experts, the cost is likely to be passed on to shippers and to consumers. But in the meantime, truckers will bear the burden, and some independent drivers will be forced out of business.

For now, many truckers say they simply use all the techniques at their disposal to stay in business.

"It's a learning experience every day," says Tom Harris, a trucker from Davidsville, Pa., speaking by cellphone from Huntington, W.Va., where he's delivering a load of scaffolding. As soon as he receives an offer, Mr. Harris gets on the phone with his wife, who looks on the computer to figure out fluctuating costs, the route, and what tangential expenses might be involved.

"My way of fighting back is just not hauling the cheap freight," he says. "I won't put a load on my truck anymore that I'm going to lose money on."

But negotiating the prices, when there always seem to be drivers willing to do it for less, can be tough.

"The load I'm on now, I tried to get more, but they say they can't afford to pay it," says Bob Benson, a trucker from Bemidji, Minn., who owns three trucks and has been in the business since 1974. He doesn't remember it being this bad in the 1970s, when fuel prices also skyrocketed.

Right now, he's struggling just to hang on to his other trucks and the two men he employs to drive them. "It's just about impossible," he says. "I'll keep on as long as I can."

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