Let’s start with the obvious, rising fuel costs. February’s average cost for diesel closed in at an average of $4.03 per gallon of diesel. A month end run-up in February broke a new threshold at
$4.10 per gallon. World events over the past two weeks has diesel pushing over $5.00 per gallon with the West Coast exceeding $5.75 a gallon. The EIA average for the week ending March 14 stands at $5.25. Is the end in sight? Not likely.
Historically we have dealt with $4.00+ per gallon during the summer of 2008, and for an extended period from 2011 thru 2015. The question is now how much higher, and for how long of a period of time?
The Rockfarm truckload index reflects the ever-increasing cost of fuel as the cost per mile eclipsed $4 per mile. Fuel will continue to be a burden as the impact on the average cost per mile continues to grow. In the LTL sector, fuel is easily adjusted and incorporated into the actual carrier charges. A truckload is a different paradigm. Fuel surcharge (FSC) applied to truckload tends to follow two paths, contractual or spot. Much like LTL, contractual FSC is applied to the contracted mileage rate and is incorporated into the overall cost per mile.
In the spot market, carriers are bidding on each lane. Those bids are typically all-in rates that include the total cost of freight from pick up to the destination. Due to the lack of a contractual FSC, the carriers will hedge an all-in rate. At this moment, the steep rise in fuel costs is hard to keep on top of, resulting in fuel becoming a bigger bite of the overall driver’s expense.
If we begin to see tightness in the market as consumer spending slows, pressure points will be applied to smaller carriers to keep their trucks moving while attempting to capture enough revenue to maintain profitability. This will result in carriers getting upside down and pushing some into default. Similar to the “great resignation” during the COVID shutdown, owner-operators may find extending a summer vacation is a better option than grappling with capacity and fuel issues. The two indicators to keep our pulse on are the number of load opportunities extended to the market and the percentage of carrier tender rejections. The first illustrates the number of loads available to haul. The second indicates the available capacity to accept the loads available.
For more information on securing the best supply chain solutions for your business please reach out to our Supply
Chain Coach team.
Brad’s journey into logistics began as a Marine Officer and transitioned from the LTL docks to the non-asset side within the logistics service provider arena. As a co-founder of Rockfarm, Brad drives our business development efforts and delivery of our promise. An Arizona native, Brad enjoys spending time outdoors in his home state with his wife and family.
“Our approach to the market allowed us an opportunity to push forward in 2008 and enable our mission, “lower the cost to serve” to stand as a cornerstone to our company today.”
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https:// www.overdriveonline.com/regulations/article/15289346/epa-intros-new-emissions-standards-for- heavyduty-trucks-engines.
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