The Car and Truck Fleet and Leasing Management Magazine

Trucking Industry Faces Long Road as Fuel Costs Rise

April 5, 2005

LOUISVILLE, KY — The spike in diesel prices is making the ultra-competitive trucking industry even more difficult, according to Land Line magazine."Companies that can manage costs will be around next year," said Judd Reese, president of National Distributors Inc., a Sellersburg-based trucking company with about 300 drivers. "Companies that can't will be gone. These fuel prices are a real big issue."National Distributors, which had been accustomed to paying about $300,000 a month for fuel, suddenly saw that cost jump in November. It has hovered above the $400,000 mark ever since, Reese said, with no immediate relief on the horizon. "The latest I'm reading or hearing is that it could be at least August before we see a break in prices," Reese said. "Where it is affecting us the most is in our cash flow." Alan Parnell, founder and CEO of Charlestown-based Mister "P" Express Inc., said his company is experiencing a similar situation. The company has tried to limit the amount of miles its trucks run without a load by taking on jobs in close proximity to one another, but with drivers hauling freight across the country, the cost of doing business still is high. "Our fuel bill for last week alone was $145,000," said Parnell, referring to his company's diesel charges for the week of March 14, when the company's trucks logged 264,300 miles. A year ago, a fuel bill for traveling the same distance was about $90,000. "We just can't adjust our pricing quick enough to keep up with the rising costs," Parnell said in the Land Line report. To keep costs in line, National Distributors employs a full-time fuel-management coordinator, who uses fuel-management software to make sure the company is operating as efficiently as possible. "Having a full-time person to manage fuel costs is something that would've been unheard of in the industry 10 or 15 years ago," Reese said. "It's just a sign of the times." Mister "P" is investing about $5 million and National Distributors will spend about $2 million on new trucks outfitted with tanks that will allow them to travel longer distances to avoid having to buy fuel in states such as California, where diesel currently sells for $2.53 a gallon, including a state gas tax of 29.5 cents a gallon, according to Land Line. By comparison, the national average price for diesel fuel as of March 22 was $2.26 a gallon. The Kentucky average was $2.12 a gallon, including a state tax of 14 cents per gallon, and the Indiana average was $2.20 a gallon, including a state tax of 18 cents per gallon. "We're just going to have to suck it up and hang tough," Parnell said. "We don't have much choice."
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