Diesel Fuel Prices & Trucking Industry

The recent surge in the cost of heating oil, diesel fuel, and gasoline in the United States has had significant impact on many sectors of the U.S. economy, but most importantly it has had quite a devastating affect on the trucking industry. This is important due to the fact that nearly "70% of U.S. communities rely solely on trucking for their supplies" ("ATA" 23). If the government continues it's trend of non-intervention and refuses to place pressure on OPEC, the prices will continue to soar well over the two-dollar mark, and cause the trucking industry as a whole to shut down bringing the U.S. economy to a grinding halt.

What is the reason that gasoline and fuel prices are so high? Most people believe it is because of OPEC raising the price of oil. This answer is only partially true. In fact, there are several others factors that must also be taken into account when determining the cause of high fuel prices in the United States and in other parts of the world.

The main reason for the price increase is that OPEC (Organization of Petroleum Exporting Countries) has decided to cut back on its oil production. What is the reason for this? Simply stated, OPEC knows that they have the United States under their control in terms of what price they want to sell crude oil to us at, and how much they want to ship. With the present economic prosperity in the U.S., it didn't take long for OPEC to seize the opportunity to make more money by cutting production of crude oil, and thus forcing consumers to pay more for fuel. Just how much higher are prices you ask? "Crude-oil prices in early March hit $34 a barrel, while a year earlier it was selling for $12 a barrel, which is nearly a 75% price increase since last year. This equates to an additional 48 cents a gallon" (Logistics Management 15).

Another key cause to the price inflation issue is the extended period of bitterly cold weather that loomed in the northern and midwestern parts of the U.S. throughout the winter months. This led to an "increased demand in home heating oil, which is widely used in the region and is virtually identical to diesel fuel" (Lang1). This increased demand for fuel coupled with the restrictions on exported oil allowed OPEC to jack up their prices an exorbitant amount in a relatively short period of time.

A third cause of the high prices is that the types of cars and trucks we are driving today use a lot of gasoline. Recent figures show that more and more Americans are tending to purchase "less fuel efficient sport-utility vehicles, trucks, and minivans as opposed to cars" ("SUV" par. 4). A clear example of this can be seen by The Chrysler Corporation's sales of Dodge Ram pickup trucks. Once the "11th best selling vehicle, it is now the 4th best seller; above the more fuel efficient Ford Taurus and Honda Accord" (Phillips 22).

The EPA (Environmental Protection Agency) and EIA (Energy Information Administration) both play key roles in the types of fuel we can run in our cars and trucks and thus they indirectly play a role in the overall "price package" that we consumers have to pay. When fuel arrives in the United States about 95% of it is in its natural state; that is crude oil. It is then pumped or shipped to refineries where certain qualities are achieved such as diesel fuel, kerosene, gasoline, and heating oil. The EPA's role is to regulate the amount of additives and other chemicals that are added to the fuels, which give them certain cleansing and lubricating properties. An important and very controversial additive in diesel fuel is sulphur.

All grades of diesel fuel, No.1 (kerosene), No.2 on-road fuel, and No.3 off-road fuel, have sulphur in them to keep the engines burning clean and to allow the fuel to burn properly (diesel fuel is almost non-flammable in it's virgin state without additives). Sulphur however is a dangerous pollutant and has very damaging affects on the ozone layer, thus it is the EPA's responsibility to step in and decide on the allowable amounts of sulphur in fuels. On October 1, 1993 the EPA stated; "No.2 fuel cannot have more than .05% sulphur per gallon" (McEwen 34). This may not seem like a big deal but to the refineries that produce the fuel it is a very big deal because all of their equipment would have to be changed to allow for the "desulphurization" of the fuel. Though the refineries argued against it saying less sulphur would damage engines the EPA upheld their decision. Thus the refineries had to put in new equipment, which in the long run ended up tacking on "an additional $ 3.9 billion to already high fuel costs" ("Cutting Sulphur" 13).

One of the industries hardest hit by the fuel cost increase is the trucking industry. Truckers depend on diesel fuel as their lifeblood, without it the rigs and our economy would come to a screeching halt. There is no single affect of high fuel costs on every driver and company; rather there are many varying degrees to which they are all affected. To large companies, it is more of an inconvenience than a problem because they do such a large amount of business that the slight change in the price of diesel is almost negligible in comparison to their revenues. For smaller businesses it is a whole different ballgame. These companies are constantly fighting and working their figures to get business because it is survival of the fittest. Whoever has the lowest rate per pallet or by the truckload is usually the one who gets the contract and with this additional expense for fuel it makes it very difficult to cut a good deal for a customer. "70% of the trucking industry is made up of carriers with six or fewer trucks. These small, often family-run businesses areÐ'...in huge debt to their fuel suppliers and are at risk of being cut off" ("ATA" 24). The independent trucker, a.k.a. owner operator, feels the most drastic affect of steep fuel prices due to the fact that he is the owner of the truck and has to provide all maintenance for the truck including diesel fuel.