By Kris Axtman

04-10-04

Dave West stopped to fill up one of the tanks on his 18-wheeler. The bill: $ 258. It wasn't so long ago that $ 258 would have covered the cost of both tanks. Not anymore. With oil prices closing above $ 50 a barrel for the first time in 21 years, and the national average for the price of diesel hitting $ 2 a gallon for the first time ever, shock waves are rippling through the transportation industry -- the main consumer of diesel fuel.

That price per gallon is more than 40 % higher than at this time last year, according to the US Department of Energy, affecting everything from trucks to ships to railroads. As Hurricane Ivan's damage to oil production in the Gulf of Mexico combines with increasing global demand, concern is rising about oil prices dragging down the national economy.

When fuel prices rise, most Americans can cut back on weekend trips, take public transportation, or use the family sedan instead of the SUV. But there are no such alternatives in the business of moving things from one place to the next. Fuel is a hard cost, the greatest expense after labour.

"Transportation is getting to be a very expensive commodity," says Tom Wade, a board member of the Transportation Association in Laredo, Texas, the busiest inland port in North America. "And it's going to be expensive for the consumer as well, with all those costs passed on."

But independent truck drivers, who can't pass along higher fuel prices, are feeling them the most. Any price hike, no matter how small, can significantly affect their bottom line.

"For independent owner-operators, it means more money coming out of our pocket and less money to put back into the truck. And if you don't keep your truck up, you go out of business," says Mr West, adjusting his cowboy hat before hitting the road.

At America's truck stops, stories are swapped over plates of chicken-fried steak and pie a la mode: Independent owner-operators have been returning their keys to dealerships and walking away from their trucks, hauling for companies for the first time in their careers, or quitting the business altogether.

The loss of experienced drivers is of particular concern in the industry, which is struggling to attract new truckers. Word is out that fuel costs comprise as much as 25 to 35 % of an independent's expenses. These high prices are coming at a particularly bad time for the industry, says Bob Costello, chief economist at the American Trucking Associations in Alexandria, Virginia.

"This is a busy time of year for trucking. We are coming into our peak demand season, with more trucks on the road than at any time of the year," he says. In addition to extra demand during the holiday season, demand is up in general: a 7.2 % rise over last year. But some truckers worry that passing the cost of fuel on to the consumer will slow the economy and therefore slow demand for their services.

"The whole situation is very unsettling," says Mr Costello.

Surprisingly, sales are up over last year at Selectrucks, a big-rig dealership in Houston. Manager Ken Dominique attributes that to a strong economy and an even stronger desire to save money on fuel. High diesel prices may have actually helped business, he says, because his company sells one of the nation's most aerodynamic and fuel-efficient trucks on the market today.

"Drivers come in every day and complain about the rising cost of fuel, but what are their options? The country's not going to stop using trucks to move goods. They just have to pay the price and hope they can get it back in the form of surcharges," says Mr Dominique.

Fuel surcharges -- or extra charges added to shipping rates -- have become increasingly common in the transportation industry. But until just last year, most rates hovered around 1 to 3 %. Today, they can be 10 % or higher. Up until February, for instance, the Burlington Northern and Santa Fe Railway Company charged customers an extra 2.5 % in fuel surcharges. They will reach 7 % in November.

With a full 15 % of its operating budget spent on fuel, increasing efficiency has been a top priority at the Fort Worth-based company, says Jeff Wright, assistant vice president of locomotive utilization. This year, it formed a fuel efficiency team for the first time and set an ambitious fuel-efficiency target of 3 % (in gross tons per mile). New guidelines for minimizing idling, power braking, and stretch braking have been implemented, as well as better training and feedback for engineers and experiments with alternative-energy technology.

In the end, that may be the bright side to $ 2 a gallon diesel fuel, says B.L. Manry, director of safety and compliance at Palletized Trucking in Houston.

"Let's face it, fossil fuel isn't going to be around forever; we haven't had a dinosaur die in a long time," he says. "Hopefully one of the hidden benefits of these high prices is that people will be looking for viable alternatives."

But for the near future, companies like his are weathering the storm with the help of a strong economy and fuelsurcharges. He says some customers "scream and holler" about the surcharges, but wind up paying them.

"If trucks weren't running, we'd all starve to death pretty quick."

One of Palletized's contractors, Martin Garza, is nearby, changing his rig's oil filter in preparation for a trip to Louisiana. He has the same complaint as West: More money for fuel means less money for maintenance on his truck. He's also noticed many more dangerous drivers on the road as they race to haul more loads.

"A bunch of these drivers are running and gunning down the highway," he says. "They are trying to offset some of these fuel costs." Mr Garza says he saw diesel prices rising, so he topped off his two tanks at $ 1.85 a gallon, "a really good price." He's worried about the cost of fuel in Louisiana, but he asks, "What are you gonna do? Anyway you look at it, you got to pay it."

Source: The Christian Science Monitor