Tough haul

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The trucking industry is experiencing the highest prolonged fuel prices in history.” -Bill Graves, president and CEO, American Trucking Associations


It‘s been a grim first quarter for 2008, to say the least, as we wait for publicly traded trucking companies to start releasing their earnings reports so we can see what tales the numbers tell.


The indications are it could be a rocky first quarter for most. United Parcel Service, for example, indicated that it lowered its first quarter earnings expectations to around 86 or 87 cents per diluted share from a previously anticipated range of 94 to 98 cents a share.


UPS

(Fuel prices and low package volume are hurting UPS.)


At UPS‘s investor conference on March 12, Kurt Kuehn, the company‘s chief financial officer, said high fuel prices and lower volume trends experienced in February through March are the chief culprits. “The U.S. economy has continued to weaken, causing a reduction in domestic package volume and a shift away from premium products,” he said. “Significantly increased fuel costs in the quarter also contributed to the lower-than-expected results.”


“Significantly increased fuel prices,” by the way, is the polite way of saying we are in the sort of record-setting territory no one ever wants to be in. According to the Oil Price Information Service (OPIS), retail and wholesale fuel prices shattered all previous records last month, and products used in the transportation sector began April with numbers up as much as 238% from five years ago.


Cowan

(Fuel has long been ultra-pricey for truckers.)


The wallet-killing fallout from OPIS‘ Transportation Fuel Index (TFI) includes some traumatic statistics:


· Americans spent about $247.7-million more each day on gasoline in March 2008 than they did in March 2007 - and OPIS estimates that the increase from five years ago is now $626-million per diem.


· Wholesale diesel prices ended March at an all time high of $3.288 a gallon, with the average retail diesel price at $4.019 per gallon. The largest increases - nearly 50 cents per gallon - occurred in northeastern states, but every region saw price advances of at least 41.8 cents per gallon.


· The average nationwide price for wholesale jet fuel in March 2008 was $3.172 per gallon, up 42.4 cents a gallon from February 2008 and up an incredible $2.235 a gallon from March 2003 - an increase of 238.7%. (Is it any wonder Aloha and ATA Airlines disappeared in the blink of an eye?)


Regional retail gasoline increases on a month-to-month basis ranged from 13.6% in New England to 26.4% in western states. Wholesale gasoline prices were up some 33.1% in the month, suggesting that the up-trend in pump prices will persist into early April.


The longer term view produces some eye-opening comparisons, according to OPIS: wholesale gasoline prices are up $1.691 gallon from March 2003; and wholesale diesel prices have advanced by well over $2.00 a gallon in every region in the country.


Trucks

(Truckers large and small alike are feeling the pain at the pump.)


“For some motor carriers, however, fuel is beginning to surpass labor as their largest expense,” said Bill Graves, president and CEO of industry trade group American trucking Associations late last month. “This ultimately will increase the cost of everything delivered by truck.”


The ATA wants the federal government to help bring down the price of diesel fuel in a number of ways, including:


· Release oil from the Strategic Petroleum Reserve

· Establish a national diesel fuel standard

· Allow environmentally responsible exploration of oil-rich areas in the U.S. that are now off-limits

· Require speed limiters set for 68 mph or lower on all new trucks

· Set a national maximum speed limit of 65 mph

· Suspend the collection of the 12% federal excise tax on motor carriers‘ purchase of auxiliary power units (APUs), which cut the consumption of fuels in idling truck engines

· Require states to grant a weight exemption for APUs


“The signs are troubling. We are concerned about fuel‘s direct impact on our industry and also its effects on the nation‘s economy,” said Graves. “The industry is doing its part to conserve fuel, but we need help.”


Sale

(Sadly, we may see a lot more of these unfortunate signs before the year is out.)


He noted that the trucking industry is on pace to spend $135 billion on diesel fuel this year, $22 billion more than in 2007 and up $83 billion in annual expenditures compared to 2003.


Those are some pretty grim numbers indeed. Now we must wait and see how they‘ve impacted trucking‘s bottom line over the course of the first quarter.

What's Trucks at Work?

Trucks at Work: Sean Kilcarr comments on trends affecting the many different strata of the trucking industry.

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