Logistics News: What is the American Trucking Associations' Answer to the "Fuel Crisis?"

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- May 13, 2008 -

Logistics News: What’s the American Trucking Associations’ Answer to the “Fuel Crisis?”

As Truckers Fail and Profits are Squeezed, ATA Exec Lays out Multi-Pronged Strategy to Congress

SCDigest Editorial Staff

Card Says:

The trucking industry is on pace to spend an incredible $141.5 billion on fuel this year. This is $29 billion more than we spent in 2007, and more than double the amount we spent just four years ago.

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While shippers ultimately pay the price, the rapidly escalating price of oil and diesel fuel costs have created what the American Trucking Association, an industry trade group, calls a “fuel price crisis,” with calls to Congress for a multi-pronged program to move fuel costs the other direction.

Last week, Mike Card, State Vice President for the ATA and also President of Combined Transport, a small trucking company in Oregon, testified before the U.S. House of Representatives Subcommittee on Highways and Transit about the impact of rising fuel on truckers and shippers and what can be done about it.

We all understand the impact these wildly increasing costs are having on the entire logistics industry, but sometimes it’s good to take a pause to really consider the numbers.

“The trucking industry is on pace to spend an incredible $141.5 billion on fuel this year. This is $29 billion more than we spent in 2007, and more than double the amount we spent just four years ago,” Card told the sub-committee.

The costs are not only adding tremendously to the cost of transportation, but taking a toll on trucking operators themselves. Card said that in the first quarter of 2008, 935 trucking companies with at least five trucks failed - the largest number of trucking-related failures since the third quarter of 2001. He also said that it is very likely that a large number of companies that operate fewer than 5 trucks also failed during the first quarter of this year.

While some of these failures are also attributable to the slowdown in freight movement, the punishing costs of fuel, for which fuel surcharges can no longer seem to keep up, is certainly a factor. Amazing to many, for most truckers, fuel now exceeds labor costs as the top operating expense.

(Transportation Management Article - Continued Below)

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The ATA Proposal

In his testimony, Card outlined the ATA’s proposals for both reducing demand for fuel as well as increasing supply, which it hopes will change the supply-demand balance and lower fuel costs. (A full transcript of Card’s testimony is available here: Mike Card Testimony before Subcommittee on Highways and Transit.)

Ideas to reduce demand:

Control Speed: Cap highway speeds at 65 MPH and strictly enforce at the state level for all vehicles; add electronic devices to trucks to prevent them from exceeding 68 MPH.
Reduce Main Engine Idling: There are barriers to carrier adoption of Auxiliary Power Units (APUs) to eliminate the need to idle when truckers are resting. The ATA calls for states to waive certain truck weight limitations for adding these devices (otherwise, a truck can carry less cargo), to eliminate the current 12% federal excise tax on these units, and to provide financial incentives to truckers to purchase APUs.
Address Congestion and Highway Infrastructure Issues: Truckers and non-truckers burn tremendous amounts of fuel sitting in traffic or moving very slowly due to congestion. The ATA recommends that Congress invest in a new congestion reduction program to eliminate major traffic bottlenecks, with a specific focus on bottlenecks that have the greatest impact on truck traffic. That action could save as much as 32 billion gallons of fuel over 10 years.
Fully Fund the EPA’s SmartWays Program: This highly successful program that incents carriers and shippers to reduce fuel usage actually saw its funding cut by 33% in the current fiscal year.
Enhance Truck Productivity: Not clear exactly, but it appears this relates to more flexibility in using trucks hauling two or even three trailers. Card said a recent study by the American Transportation Research Institute found that use of these vehicles could reduce fuel usage by up to 39%, with similar reductions in criteria and greenhouse gas emissions.
Regulate Petroleum Exchanges: Congress should consider the merits of expanding government oversight of electronic petroleum exchanges to make it less attractive for hedge funds to speculate on petroleum prices, while ensuring that a robust market exists for legitimate purposes.

Ideas to increase oil/duel supply:

Increase Domestic Exploration: In Alaska, off various coasts, tar sands, etc.
Increase US Refining Capacity: Streamline the process for expanding or building refining facilities.
Enact a Sensible Approach to Renewable Fuels: Invest smartly, and stop some of the silliness. For example (news to us too) Card said: “We believe that the American public would be outraged if they knew that their tax dollars were being spent to subsidize biodiesel that is ultimately exported for sale outside the U.S.”
Adopt One National Diesel Fuel Standard: Stop the state level “boutique” fuel standards, which add refining constraints and costs.
Stop Filling the Strategic Petroleum Reserve: Temporary changes to the program could drive speculators out of the market.

Whether you agree or disagree, it’s a well-considered list. Not much word yet on Congress’ reaction.

What’s your reaction to Card's testimony, and the ATA recommendations? What would you do to increase supply or to reduce demand? Let us know your thoughts at the Feedback button below.