Fleetowner 2022 Petro

Fleets strive to keep a lid on fuel costs

Aug. 14, 2006
Ongoing volatility in the diesel market has led trucking companies to make strict pricing discipline a regular part of their operations

Ongoing volatility in the diesel market has led trucking companies to make strict pricing discipline a regular part of their operations.

In second-quarter earnings reports, most trucking companies said they are still able to minimize the impact of higher fuel costs on the bottom line, thanks to the rigorous application of fuel surcharges and operational adjustments. Yet fuel costs remain a major concern as they continue to eat up more and more operating capital.

“The skyrocketing cost of fuel is an obvious concern,” said Stoney “Mit” Stubbs, Jr., president & CEO of Dallas-based refrigerated carrier Frozen Food Express (FEE). “We continue to work with our customers to address the rising cost of crude oil as the price per barrel reaches [and exceeds] $70, with no apparent end in sight. But our fuel surcharges have helped us mitigate that problem.”

Stubbs noted that of the $252.9 million in revenue generated during the first half of 2006, $37.2 million, or 14.7%, came from fuel surcharges. Fuel surcharges were up $12.4 million compared to the same period last year.

Some fleets, such as Covenant Transportation in Chattanooga, TN, actually came out ahead, thanks to a combination of better surcharge collection practices and reduced fuel consumption.

“Our fuel costs, net of surcharge on company truck miles, actually improved versus last year, despite a substantial increase in fuel prices,” said David Parker, Covenant’s chairman, president & CEO. “Improved collection of surcharges, better fuel economy due to lower idle time, and [fewer] nonrevenue miles contributed to the improvement.”

However, Randy Marten, chairman & president of Mondovi, WI-based refrigerated carrier Marten Transport, pointed out the continued rapid growth of fuel as an operating expense will constrict profit margins.

“The major change in our expenses for the second quarter this year related to fuel costs,” he said. “Our average cost of fuel in the second quarter was $2.75 per gallon, compared with $2.15 per gallon in the same period last year. That means fuel expenses, net of fuel surcharges and expressed as a percentage of freight revenue, increased 193 basis points over the second quarter of 2005 – not only due to the increased cost of fuel, but also because miles driven by company drivers increased as compared with independent contractors.”

G. Larry Owens, president & CEO of Smithway Motor Xpress Corp, Fort Dodge, IA, shares Marten’s worries.

“For the second quarter, average fuel prices increased 28% to $2.75 per gallon, compared to $2.15 per gallon in the second quarter last year,” he said. “Even though fuel surcharge revenue mitigated 77% of this price increase, fuel prices reduced our second quarter net earnings by approximately seven cents per share, and negatively impacted our operating ratio by approximately 116 basis points.”

About the Author

Sean Kilcarr | Editor in Chief

Sean previously reported and commented on trends affecting the many different strata of the trucking industry. Also be sure to visit Sean's blog Trucks at Work where he offers analysis on a variety of different topics inside the trucking industry.

Voice your opinion!

To join the conversation, and become an exclusive member of FleetOwner, create an account today!

Sponsored Recommendations

Report: The 2024 State of Heavy-Duty Repair

From capitalizing on the latest revenue trends to implementing strategic financial planning—this report serves as a roadmap for navigating the challenges and opportunities of ...

Fleet Industry Benchmarks: How does your fleet stack up?

Discover how your fleet compares to industry benchmarks and gain insights from a 2024 Benchmarking Report on maintenance spend, turnaround time, and more. Join us to identify ...

Build a Tolling Program to Manage Toll Fees and Risks

Fleets looking to effectively manage their operational costs should consider their tolling costs. Download the PrePass whitepaper, “Build a Tolling Program to Manage Toll Fees...

Reducing CSA Violations & Increasing Safety With Advanced Trailer Telematics

Keep the roads safer with advanced trailer telematics. In this whitepaper, see how you can gain insights that lead to increased safety and reduced roadside incidents—keeping drivers...