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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.
“Honestly, I woke up this morning wondering if I’m going to make payroll this week,” Kirk said.
President Joe Biden last week announced the release of roughly 1 million barrels of oil a day for six months from the Strategic Petroleum Reserve in an effort to lower gas prices. The move could free up as much as 180 million barrels of oil, the largest release of U.S. reserves in history, with the first barrels coming on the market in May.
Biden said he didn’t know how soon or by how much prices at the pump would drop.
But the move may not be enough to save the smaller trucking companies already struggling to stay afloat, said Todd Spencer, president of the Owner-Operator Independent Drivers Association.
Spencer said a national shortage of truckers and high demand for goods is propping up those drivers who are paying more for gas but also getting more work. He’s worried about what happens if demand wanes while prices are still high.
“We know the current demand will slow down, and when that happens, we’re going to have trucks sitting everywhere and drivers with nothing to do,” Spencer said. “Margins can get really tight for little guys, quick.”
But not every small trucking company is struggling.
“It’s not affecting us to a huge degree,” said Tom Hilker, whose Wisconsin family trucking company hauls refrigerated freight for Kroger, a national grocery chain. “We have a lot of standard accounts that have a surcharge built in, so that every time gas prices goes up and down the fees go with it.”
Business couldn’t be more different for Kirk, the Baltimore trucker who is waiting for diesel fuel prices to come down.
For the past five years, Kirk Transport has delivered beverages, food, freight and medical supplies from New Jersey to North Carolina — sometimes with surcharges and sometimes not.
But now, he may be forced to sell off equipment to keep from falling in the red.
“At the end of the day it’s hurting our profit margins,” he said.
Source: This post first appeared on NBC News