Pumped up fuel prices
The benchmark diesel price that the trucking industry uses to calculate fuel surcharges hit a new record on Monday.
The Dept. of Energy/Energy Information Administration weekly retail diesel price jumped 74.5 cents to $4.85 per gallon, 9 cents higher than the previous record on July 14, 2008.
Fuel prices are up everywhere but there are regional differences. The average cost of diesel fuel in California is now a staggering $5.83 a gallon.
How will spiking prices affect rates?
Fuel surcharge calculations typically run from Tuesday to Monday, so the impact of the latest spike in diesel prices is just starting to be reflected on invoices.
American Trucking Associations Chief Economist Bob Costello says fuel surcharges can dull the pain for contract carriers. “Fleets generally have to pay for their fuel on the spot, but they don’t get reimbursed from the shippers for 30 days,” Costello explains. “Some fleets may have to tap their lines of credit now to fill that gap. The trucking companies very much care about the price of fuel.”
Broker-to-carrier rates on load boards are “all-in” rates that include a line-haul portion and fuel surcharge. DAT reported that as a national average, the surcharge for spot van freight was 45 cents a mile last week. It was 46 cents for the month of February, up 19 cents year over year and 5 cents higher compared to January. Surcharges could increase 10 to 12 cents per mile this week. The company offers a primer on fuel surcharges for spot freight here.
At these prices, fleets will start taking steps to improve fuel economy and freight efficiency, writes Michael Roeth in Fleet Owner. This includes governing speeds, which would translate to covering fewer miles during a driver’s duty cycle.
Nyet to Russian containers
The International Longshore and Warehouse Union, representing about 20,000 dockworkers at West Coast ports, announced that its members will not load or unload any Russian cargo imports or exports. “With this action in solidarity with the people of Ukraine, we send a strong message that we unequivocally condemn the Russian invasion,” ILWU International President Willie Adams notes.
The threat is largely symbolic, writes Eric Kulisch at Freightwaves, given the small amount of Russian-related cargo that moves across West Coast docks. At the ports of Los Angeles and Long Beach, Russian imports and exports represented just four-tenths of 1% of all containerized cargo in 2021.
Punting on contract rates
Freight brokerage firms are anticipating that contract rates will keep rising in 2022, with a slowdown not expected until year’s end.
“I think we’re going to definitely see continued strengths through the rest of the year, as capacity stays tight and as supply chains stay pretty messed up,” Evan Armstrong, president of the third-party logistics market research firm Armstrong & Associates, told Transport Topics. “The real key will be what happens going into 2023.”
Armstrong noted that while growth may slow headed into next year, factors that could maintain pressure on rates include diesel prices, robust consumer demand, international supply chain problems and the truck driver shortage. He suggested all of this will have an effect on companies’ margins.
Bloomberg Intelligence and Truckstop.com released a survey Feb. 23 that found about 56% of brokers expect contract rates to rise over the next six months. About 75% expect factors such as restocking, increased economic activity, supply chain dislocations and driver availability will help propel growth.
FMCSA to eliminate traffic ticket reporting requirement
The Federal Motor Carrier Safety Administration has issued a new rule that will eliminate a traffic violation reporting requirement that many truck drivers found to be “redundant” and “time consuming.” Currently, drivers operating commercial motor vehicles (CMVs) in interstate commerce must prepare and submit a list of their convictions for traffic violations to their employers annually.
The FMCSA notes that the requirement is “largely duplicative” since motor carriers are required to annually obtain motor vehicle records for drivers they employ in the states where those drivers are licensed. The agency says that eliminating this requirement will cut down on duplicate paperwork without negatively impacting CMV safety. The new rule will take effect March 9