SIOUX FALLS, SD (KELO) – A fuel contract or negotiated fuel discounts could help truckers with rising diesel costs but the increased costs could still be passed on to consumers.
Trucks handled 70.9%, or 8.8 billion tons of the total tonnage shipped annually in the US as of 2017, according to the US Census Bureau. That is the latest year for which statistics are available.
The American Trucking Association uses freight revenue as a data point. It said trucks handled 80.4% of the nation’s freight bill in 2020.
But if a trucking company or a trucker wants to stay in business it cannot absorb all of the increased fuel costs.
Seth Denning’s company Prime Time Express in Corsica hauls livestock across 48 states.
Some of the increase in diesel is passed on to the trucking customer through increased surcharges and shipping fees, he said.
Denning will get a fuel price / national freight rate each day. “That gives me more or less the cost from point A to point B,” he said.
A buyer will know that estimated cost before buying livestock that day, Denning said.
The seller may not make as much money because the buyer won’t have as much to spend on the livestock because transportation costs will increase.
Denning’s company is trying to cover costs without overcharging the customer.
When the livestock eventually ends up with a processor, consumers may be paying more for their steak or pork chop because of increased transportation costs, Denning said.
It’s similar for non-food items.
Shelley Koch, the owner of K & J Trucking in Sioux Falls, said increases in fuel costs can eventually reach the consumer with higher prices for food and other items.
“Every consumer will pay for this (increase),” Koch said of fuel costs. Consumers will pay higher costs at the pump but also higher costs for items, she said.
Unlike Prime Express, K & J does not own trucks but works to schedule loads and times with owner-operators of semi-trucks.
Koch said her company has had a fuel surcharge since 1999. “That amazes me,” Koch said of having a surcharge for more than 20 years.
The surcharge is a fee added to the cost of transporting items and paid by the company’s customers.
It was added by K & J when fuel prices rose in 1999, Koch said.
How trucking companies handle the upfront costs of fuel
K & J also has a negotiated fuel discount with several main truck stops in the nation.
“We negotiated a substantial discount,” Koch said. The discount will fluctuate based on the cost of fuel.
Koch said the company gets discounts at truck stops most of the owner-operators use around the US This ensures that truck stops will sell a high volume of gas to truckers who receive the discount.
The discount price will vary on the geographic location as diesel prices may be higher on the east and west coast than in the midwest, she said.
Owner-operators get 100% of the fuel discount, Koch said.
Some companies may deduct several cents from the discount as a way to generate income, she said.
Denning said it’s not practical for Prime Time Express to fuel prices or discounts because of the real-time demand for trucking, he said.
Livestock owners can schedule shipping without much advance time, Denning said. There’s not as much of a regular set schedule as there is for truckers who handle refrigerated items, for example, he said.
His trucking customers tend to understand the need for increased transportation prices because they drive by gas stations daily and see the prices, Denning said.
One way the company tries to reduce fuel costs is to schedule a full livestock load on a return trip to South Dakota, Denning said.
There is no guarantee that livestock will be ready for transport on the return trip when the trucker delivers to the destination. Denning said even when a livestock load is available for the return trip, the truck may have to travel miles in a different direction before heading back to South Dakota.
Challenging time for single owner operators or small companies?
Truckers are an independent group but some single owner-operators may be looking to join a company because of rising fuel prices, Koch said.
A single owner-operator doesn’t typically have the ability to negotiate a fuel contract or discount, she typically said.
Even if they add the fuel costs to the freight cost paid by the customer, they still need to pay that cost upfront, Koch said.
Some owner-operators may not want or be able to pay the higher fuel prices, she said.
Costs of equipment including the trucks themselves may also add to truckers leaving the industry or keep truckers from joining it.
“A used truck that was $ 50,000 three years ago is $ 150,000 today,” Koch said.
Industry publications said on average, a semi-truck may get 6.5 mpg. Also, many semi-trucks have fuel tanks of around 120 to 150 gallons with two tanks of each.