The trucking industry is vital to the supply chain across the nation.
As diesel prices rise, and they have been rising fast, the cost of moving goods is also increasing.
That increased cost is being passed along from shipper to hauler to receiver, and ultimately, to the consumer.
Rebecca Oyler, president and CEO of the Pennsylvania Motor Truck Association, said last week, diesel prices jumped 75 cents to the highest level ever. The price in Pennsylvania Wednesday averaged $5.43 a gallon.
“Fuel prices affect everything throughout the supply chain,” she said. “It contributes to inflation.”
Oyler said trucking companies are very competitive and vital to the economy, so instability leads to problems. She explained that companies charge a surcharge to shippers based on the price of fuel from the week before. “That creates a gap between real prices and surcharges,” she said.
Those surcharges, which Oyler said, are not keeping up with inflation, are passed on to the consumer, which is being felt at the store.
Brian Wanner, general manager of Peters Brothers Trucking Inc., Lenhartsville, Berks County, said his company buys a million gallons of fuel a year. “If the price goes up $1, that’s a $1 million a year. A lot of that goes to the customer, but not all of it,” he said.
Last week, Wanner said his company filled its on-site tank for $4.70 a gallon wholesale. “If we would have waited a day, the price would have been $5.73.”
Fueling at the yard saves the company money, but Wanner said half of the fueling is done on the road and prices are sky-high. “This is crazy unnecessary; it doesn’t need to go up that fast. The volatility is hard to adjust to that quickly.”
The 65 trucks the company operates deliver across the country and Wanner said the increase in costs ultimately lands on the consumer.
Dave Billing, president of Billing Trucking Inc., Allentown, said it is hard to keep his trucks moving. At last fill up, Billing said the price was $5.93 per gallon. “We cut our delivery in half so we could afford to pay for it.
“We have to pass it on to the shipper or we couldn’t operate,” he said.
“This is a big added expense and we are dealing with it. We either pass it along or absorb the cost,” he said.
The company, which is down to seven trucks from 30, has steady customers, so Billing said they must work with them or lose them to other carriers. “The little guys are hurting because we can’t compete with the big guys,” he said.
While the company has reliable drivers in this environment of a driver shortage, he said his other trucks are idled due to a lack of drivers, which is another major issue companies are facing.
Ahmed Rahman, research felllow at the Institute of Labor Economics at Lehigh University, Bethlehem, said the price of diesel is definitely skyrocketing, but the prices were artificially low because the economy ground to a halt during the pandemic.
“Part of the rise is from this,” he said. “We are looking at reflation, which is getting back to the normal trend.”
Recently though, he said, the alarming rise in prices is leading to inflation which may lead to stagflation, or a slowdown in movement of goods. “That trend is not good.”
Rahman said the country relies on trucks to move all goods and unless the Federal Reserve does something more dramatic than it is talking about now, the country could see double-digit inflation very soon.
“Products might not be available if prices keep rising,” he said.
The Fed is widely expected to raise rates by a quarter-point this week, the first hike since 2018, according to CNBC. Watchers are also expecting the central bank to offer a new quarterly forecast that could indicate five or six more hikes this year, the network said.
The slowdown of merchandise movement is something shippers don’t want to talk about. C&S Wholesale Grocers, one of the largest distributors in the Northeast, had no comment.
A few truckers, however, who asked to remain anonymous, said they are seeing less business at wholesale distribution centers. While the wait to get into a door is usually long, they said there are definitely fewer trucks waiting to load and unload.
Rahman, who said the country could be more fuel self-sufficient, said “we can’t turn on a dime.
“It takes time to establish the supply chain,” he said. In fact, it takes years to refigure when supply and demand change. There was no incentive to increase drilling over the past two years because of the slowdown.
“The prices will definitely be passed on (to the consumer), but I think we will also see a rationing of deliveries. We are seeing signs of that now.”