For small trucking companies, high price of diesel may be unsustainable
Posted on April 21, 2022
For some small trucking companies that transport supplies and goods across the country while operating on thin margins, the high price of diesel may force them out of the industry, some truck drivers and industry experts said.
“I’m in survival mode right now,” said Michigan trucker Tim Smith of how diesel fuel prices are pushing his business to the brink. “If there’s no profit, there’s no point.”
For 12 years, Smith's company, Tim A. Smith Trucking LLC, with its fleet of four trucks, has transported sand and gravel used for state highway and building projects in Lansing. Lately, his operation has been losing money.
With the average cost of a gallon of diesel fuel in the U.S. at $5.07 as of Wednesday, according to AAA, Smith is spending $40,000 a month on fuel, more than double what he paid this time last year.
“We’re all kind of rolling the dice,” said Smith, who added that he plans to save money by purchasing cheaper auto parts and tires while his company burns through cash. If that doesn't work, he'll park his trucks, he said.
Truck drivers, like consumers across the country, are facing record high gas prices following turmoil in the oil market caused by Russia’s war in Ukraine and the ongoing pandemic.
Small trucking companies — often referred to as owner-operators — sometimes are not able to negotiate a fuel surcharge that would allow them to pass along the rising cost of fuel to a shipper’s freight bill, leaving them vulnerable when prices fluctuate.
Smith, for instance, was working under a state-highway contract and received a flat fee to deliver products without surcharges.
On average, small trucking companies buy 80,000 gallons of diesel each year, according to the Owner-Operator Independent Drivers Association.
Brian Hitchcock, chairman of the Michigan Trucking Association, said it’s only a matter of time before the higher costs force some companies to shut down.
“It’s definitely going to affect some owner operators and smaller carriers,” he said.
Marquis Kirk, 40, said he is considering downsizing his Baltimore-based company to try to stay in business. He owns four trucks and employs four drivers.