Pain at the pump
High diesel prices put brakes on truckers' profits
Joe Reece, owner of Reece Trucking in Craig, scoffs when people think he’s making a good living as a for-hire dump truck operator. Though the businessman of nine years recently raised his per-hour rates, record high diesel prices in the Rocky Mountain region aren’t helping him turn a profit.
“I just ran (a truck) 10 hours in Hayden and I spent half my wages fueling it up,” he said. “Diesel prices are bad this year. They’re the worst I’ve ever seen it.”
In updates by AAA, diesel prices for a gallon of retail diesel fuel on Friday averaged $2.23 around the state, which is up 62-cents average from the same date last year. The state’s highest average diesel price per gallon hit $2.24 a gallon earlier this week.
Diesel prices around Craig are higher than the state’s average, and, in an unusual shift, outpacing the price of gasoline. Saturday’s local diesel prices hovered around $2.34 a gallon while an average price for regular grade gasoline was about $2.17 a gallon. Saturday’s highest recorded statewide gas prices were recorded at $2.24 a gallon.
According to the government’s Energy Information Administration, September’s two big storms, Tropical Storm Isidore and Hurricane Lili that hit the Gulf Coast region — an area which is responsible for more than half of the county’s oil — has had an effect on diesel outpacing gas prices.
The national distillate fuel supply, which includes diesel as well as heating oil, has dropped for more than a month with crude oil inventories dropping on Oct. 4 to the lowest levels since the mid-1970’s. Distillate fuel inventories were 4.7 million barrels short during the first half of October, the EIA said, which will make it unlikely that gas and diesel prices will soften over the winter.
For trucking company owner Phill Bethell of Lay, the price hikes mean passing on fuel charges to customers. Fuel is the highest operating costs, second only to employee wages.
“Our profit margins are shrinking,” he said. “The cost of diesel fuel is really hurting everybody. We have to try to add on surcharges and pass it on to the customers, but they’re not happy about it either.”
Bethell’s almost 25-year-old company consists of nine trucks with customers mostly in the local oil and gas industry. Five years ago, he paid about $6,000 for about 7,300 gallons of diesel fuel, but his most recent bill had more than doubled that amount. Bethell said he has added fuel surcharges on customers’ bills to try to recoup the costs of running trucks that often get, at best, five miles to the gallon.
“The difference is, it’s either their profit or my profit,” he said. “Prices are high, but I have to stay in business. I like to eat, too.”
Travis Purdum, a crew leader of Alexander Purdum Construction Services, hauls building materials about 500 miles each week from Olathe to Rock Springs, Wyo.
A diesel pickup is ideal to get the job done, because it is more efficient that a gasoline-powered vehicle and it has more power. There’s little his company can do to recover the costs of diesel fuel, he said.
“Usually it just winds up that we get a smaller piece of the pie,” Purdum said.
Since diesel prices have risen, Reece said he’s initiated some fuel-saving measures, including driving slower. Still, with his one- truck operation, Reece may have to raise rates again next spring.
According to the American International Automobile Dealers, the country’s trucking industry consumes nearly 34 billion gallons of diesel fuel a year. An increase of one penny annualized in a year costs trucking industry an extra $340 million. Diesel fuel often is the second-highest operating expense equaling as much as 25 percent of a company’s total operating expenses, the group said.
“This industry is on a recovery path, which is a great indication that the economy is on solid footing, but surging energy costs could easily act as a roadblock,” the group wrote in a letter in September to the U.S. Department of Energy. It requested the government agency stem soaring fuel prices by loaning refineries more crude oil.
About two-thirds of the country’s commodities travel by truck.
“You just kind of grit your teeth about it and go on,” Reece said.
“If we can get over the fuel prices, we’ll probably be OK.”
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