Daily Stock Market Reports

Rising fuel prices costing local trucking companies millions | Local News


MURRAY – While record high gas prices have made life harder for just about everyone, arguably no one feels the crunch more than companies whose bread and butter is made on the road — namely, trucking companies.

Brian Maynard, president of Rudolph Freight in Murray, said that with most of the company’s drivers having tanks that hold 200 gallons, each trip to the pump is incredibly expensive.

“On Feb. 28, the national average price of diesel fuel was $4.10 a gallon, and then a week later, the week of March 7, it went from $4.10 to $4.84,” Maynard said. “And then on Monday, it went from $4.84 to $5.25 a gallon. It’s the unpredictability of it (that makes it so difficult), and it’s increasing so fast it’s hard to budget. Then you have to charge a customer more for the increase in cost of fuel. 

Maynard said that because the freight companies parent company is Rudolph Tire, many people assume they mostly transport tires, but the business is much more diverse than that. He said that besides tires, they haul everything from automotive products to windows. Every one of those companies is feeling the squeeze, and that cost gets passed on to shoppers in the store.

“It just passes on ultimately to the consumer because whatever product we are hauling, at the end of the day, the consumer is the one that’s paying for it,” Maynard said. “So that’s who it’s going to end up hurting. And, of course, it just increases the operating costs for running a business.”

Paschall Truck Lines is based in Murray, but has offices in locations around the country and hundreds of trucks to fuel. CEO Dave Gibbs said PTL has office staffs in Indianapolis, Memphis, Atlanta, Laredo, Texas, Brownsville, Texas and Joplin, Missouri.

“Those are the key offices and terminal staff we have, and we operate about 1,150 trucks in our business,” Gibbs said. “We have a little over 1,500 employees in our company. Behind employee wages, fuel is the second largest expense we have, so it’s obviously a big item for us. As a trucking company that operates around the country, we run 100 million miles or so on our trucks, and given the average miles per gallon, we buy about 14.3 million gallons of diesel a year. 

“To give you a rough example, if fuel goes up by a buck a gallon, that’s $14.3 million of additional expense. Like most carriers that operate in our space, we negotiate what’s called a fuel surcharge programs with our customers, and our customers are Fortune 500 companies primarily — the Walmarts and the Procter & Gambles and Kellogg’s and Home Depots and people like that. We move their products from manufacturing plants to their distribution centers or from their distribution centers to their stores, and with any of that, we negotiate fuel surcharge agreements that are part of our contracts. Those fuel surcharge agreements typically will allow us to recover about 70% of a fuel spike.”

However, for example, with PTL typically buying 14.3 million gallons of diesel a year, an increase of only one dollar means the company recovers only about $10 million of that $14.3 million additional cost. That means PTL would have to absorb $4.3 million of that extra cost in its own budget, Gibbs said. But, of course, the company isn’t dealing with only a dollar increase, since the average price for diesel was $3.95 at the beginning of February and had risen to $5.29 a gallon by Wednesday of this week.

“So on a nationwide average from Feb. 1 to (Wednesday), it was up $1.34 a gallon,” Gibbs said. “That’s a very big shift. While our fuel surcharge allows us to recover 70%, and that’s good, a dollar increase is a very big number. Obviously, it’s a big impact to our company and to our customers as well. 

“Inflation is all the talk today, along with the war (in Ukraine) and COVID and everything else, but the customers that I just mentioned, whether it’s Home Depot or Procter & Gamble, with that 70% fuel surcharge that they’re paying us, they are absorbing a much higher cost across their transportation networks. Ultimately, that feeds inflation and everything they make and ship and produce, so it ends up costing money on the store shelves. So it’s not just us, it hits the whole supply chain.” 



Read More: Rising fuel prices costing local trucking companies millions | Local News

You might also like