Trucking handling high fuel prices … for now Fleet Owner

Trucking handling high fuel prices … for now

Though diesel fuel prices remain at high levels in the U.S., stabilizing this week at an average of $4.142 per gallon across the country, the trucking industry by and large isn’t being too badly affected so far, according to experts.

“From an industry overview standpoint, as of now, we’re not seeing a huge impact like we saw in 2008,” Eric Starks, president of research firm FTR Associates, told Fleet Owner. “In particular, we haven’t seen the huge price spikes we did back a few years ago – the [per gallon price] numbers have gone up very slowly compared to what’s happened to [the price of] gasoline in the U.S. That’s the big thing.”

According to the Energy Information Administration (EIA), diesel fuel prices actually dropped half a penny this week to an average of $4.142 across the U.S., compared to $4.147 last week. Diesel fuel prices decreased in almost every U.S. region this week – even California – except for the Central Atlantic, where diesel went up 1/10thof a penny to $4.28 per gallon from $4.279 the week before.

EIA’s data showed, however, that the average price of diesel is up nearly 17 cents per gallon this week compared to the same time period last year.

By contrast, gasoline prices are still climbing fairly fast, according to the agency, rising in excess of 2 cents per gallon this week to a U.S. average of $3.941 – a price nearly 26 cents higher per gallon when compared to the same week in 2011.

The highest one-week jump occurred in the Rocky Mountain region, where per gallon gasoline prices increased over 6 cents per gallon, followed by the Gulf Coast and East Coast, where prices spiked well over 4 cents per gallon this week versus last week.

The rapid and sustained increase in gasoline costs is hitting consumers hard, according to motor fuels research by The NPD Group. The firm noted that consumers paid 24% more dollars to purchase 1.7% fewer gallons in 2011 compared to 2010 – representing an extra $76 billion dollars being sent into the country's collective gas tank.

“Consumers continue to modify driving patterns to purchase fewer gallons, but it isn’t enough to offset price increases at the pump,” noted David Portalatin, motor fuels analyst at NPD. “There’s no doubt that the consumer is losing share of wallet at the pump despite trying to reduce consumption.”

According to the company’s most recent Motor Fuels Index findings through March 2012, consumers cut back another 1% on gallon purchases yet  spent 9% more for those gallons compared to the same time period last year.

“Gas prices have continued to increase into the spring of 2012 with more increases expected,” Portalatin added. “And while seeing $3 plus on the pump is no longer the shock it once was, there is still only so much money in the wallet, and something will need to give in order to fill the tank.”

However, FTR’s Starks stressed that trucking isn’t suffering from similar “wallet stress” yet due to diesel fuel prices increases and not just because they’ve gone up far slower than gasoline prices.

“The big reason is that payment terms have ‘normalized’ in trucking compared to 2008,” he explained. “We’re back to a 30 to 45 day payment cycle whereas a few years back we were seeing many terms extended out to 120 days. That creates a ‘cash crunch’ for a carrier if fuel prices suddenly jump, which is what happened in 2008.”

Yet what concerns Starks and other analysts is if diesel costs suddenly increases 50 cents per gallon in a month or reacesh the $5 per gallon mark.

“Either of those would create real havoc in the system,” he noted. “But so far the industry by and large is OK – most are collecting a robust fuel surcharge and have a good payment cycle that provides enough cash to handle the slow increase in diesel costs we’ve experienced. There’s still plenty of wiggle room.” 

TAGS: News
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