The Effects of Fuel Prices on Transportation Companies

As the price of fuel rises and falls, many transportation companies have felt the effects of extremely high prices at the pumps. Even though fuel prices have dramatically declined, many companies were not financially strong enough to weather the storm. To try to offset the extreme new highs in fuel prices, transportation companies have started charging higher fuel surcharge prices, but even that wasn’t enough.

The trucking industry was probably the hardest transportation method hit during the increase in fuel prices. As the price of diesel soared way over four dollars a gallon, many companies had to either change their policies, or fold like some of their competition did. Many trucking companies employ truck drivers who buy their own fuel, and get paid at a fixed amount per mile. This method works great if the fuel prices are low, but at over four dollars a gallon, this simply wasn’t enough.

From 1997 to 2007, truckers saw diesel prices jump over 100% from two dollars to over four dollars per gallon in ten years. This has caused the trucking industry to learn some new tricks when it came to increasing the mileage per gallon of their fleets. Some of these solutions were simple, such as slowing down on the highways, or checking tire pressure more often, but other technological advancements have been aimed at keeping these tractor trailers more fuel efficient. Advancements in aerodynamic engineering have been proven to reduce fuel consumption by twelve percent, or about two thousand gallons of fuel on a truck that travels an average of 130,000 miles a year. This has translated into a savings of almost $5,000 a year. In an industry where most rigs are owner-operated, this is a welcome advance in technology. For every one-penny increase in the price of diesel, the trucking industry spends approximately $391 million dollars. When rapid fluctuations in the price of fuel occur, you can see how this may become a major problem. One company, Con-Way, based in Michigan, estimates that the trucking industry spent nearly $120 billion dollars in fuel costs, a number that figures to drop dramatically as the price of fuel comes tumbling down from its over four dollar a gallon peak earlier this year.

So far in 2008, nearly one thousand smaller trucking companies had to file for bankruptcy, with an additional few large companies also having to “bite the bullet”. At the beginning of the year, with fuel prices almost at their peak, it was estimated that the trucking business already saw a twenty percent decline in business, leaving nearly 42,000 less trucks on the road. That is nearly two-and-a-half percent of the trucking fleet in the United States. This has not all been bad news for truckers, however. The foreign demand for tractor trailers in Russia and China have given owner-operators of tractor trailers a new opportunity. Some truckers have opted to sell their aging trucks in favor of newer, more aerodynamic trucks that will not only save money now, but also in the long run as fuel prices continue to drop dramatically. If the current trend of falling fuel prices continues, the trucking industry may become even more lucrative then it has been in the past. Although the price of diesel is a lot less, don’t expect many trucking companies to relax their prices.

Increasing profits isn’t always the only motivation behind technological advancements in the trucking industry. Reducing global warming and smog are also critical factors in the recent advancements of technology. Simple changes in driving habits have already started to take an effect on the amount of emissions that a truck releases into the atmosphere. By reducing the speed of tractor trailers from 75 miles per hour to 65 miles per hour, truckers estimate over one mile per gallon increase in fuel economy. It may not seem like much, but for trucks that average less than ten miles per gallon, the increase is huge. The corresponding amount of emissions is also reduced, as less fuel is being consumed. In California alone, these changes, along with technology such as heat-trapping emissions, and increased exhaust-filter technology, emissions have been reduced by 17 million metric tons of carbon dioxide. That is the equivalent of taking 2.5 million cars off the roads. The results are astonishing.

Even though it took a near economic depression to get trucking companies to change their ways, the recent advancements in technology will only make freight shipping cheaper in the long run. Exciting new advancements have also greatly reduced carbon dioxide emissions, another welcome advancement in the trucking industry. All-in-all, the companies and individuals that made it through this crisis will be better off in the long run, as will us, the consumers.




By: Devin Pirrone