If you thought summer might mean a return to last year’s reasonable fuel prices, think again. Experts say the trucking industry should brace for continued high prices and volatility.
Inventories for both gasoline and diesel are low for the summer driving season, said Roger Simons, president of Simons Petroleum, at a forum on the fuel crisis sponsored by the National Association of Small Trucking Companies. Add to that scarcity continued OPEC supply constraints on crude oil, extremely tight capacity at North American refineries and environmental laws that require separate storage of multiple grades of refined petroleum products, and the trucking industry could be in for a long-term problem, Simons said.
Fuel buyers are casting about for solutions. Bob Costello, chief economist for the American Trucking Associations, told attendees at the NASTC forum that the United States desperately needs a national energy policy. Like Simons, Costello sees ongoing problems due to EPA regulations and overdependence on foreign petroleum. In addition, Costello said, Asia’s economic rebound is increasing demand for petroleum, while OPEC countries hold firm on supply.
ATA supports a national energy policy that attempts to stabilize petroleum markets and reduces dependency on foreign oil, Costello said. The United States currently imports about 53 percent of its petroleum, and more than half of that amount comes from OPEC countries. A major piece of an energy policy, Costello said, would be environmentally sound development of Alaskan oil production. The United States should use several mechanisms to stabilize the market, including releasing oil from the Strategic Petroleum Reserve, he said.
Simons and Costello agree that diesel prices are unlikely to drop substantially in the foreseeable future. Simons predicts national average prices of $1.40 to $1.50 to be the range of national fuel prices in the coming months. Even when prices drop, Costello said, they are “sticky on the way down”—meaning that prices rarely fall as quickly as they rise. “Expect continued high prices and volatility.”
“We think this is an emergency,” Costello continued. “If you have a significant number of trucking companies going out of business because they can’t afford to put fuel in their trucks, think what that’s going to do to the supply chain.”
A true solution to the fuel problem, according to ATA, is increasing supply in the long run by reducing dependence on foreign oil and in the short run by releasing petroleum from the Strategic Petroleum Reserves. But those remedies are controversial. Environmentalists oppose further exploitation of Alaskan oil fields, while national security proponents and others question using petroleum reserves to stabilize markets.
A less effective but more likely fix is adopting fuel surcharges. Trucking company owners and managers who attended the meeting reported mixed success in getting shippers to pay any fuel surcharge. Some reported that they received them from regular shippers but not on brokered backhauls, while others said their shippers refused even to pay surcharges specified in contracts. Even when shippers do pay surcharges to small trucking companies, the surcharges rarely cover the full impact of higher fuel prices, said attorney Henry Seaton, who moderated the NASTC fuel forum.
Costello says that the real solution is a new energy policy, but he disagreed with those who said the United States doesn’t already have a policy. “Our energy policy is to ignore fuel until prices go up and then panic like hell,” he said. “We’ve got a museum as our 50th state with billions of gallons of oil that we cannot touch.”
Avery Vise is the editor of Trucking Co. magazine, a publication offering business solutions for small fleet owners. Trucking Co. is a Randall Publishing magazine.
