Trucking news: ATA calls on White House to tap Strategic Petroleum Reserve
Jeff Berman, Senior Editor -- Logistics Management, 3/25/2008
ARLINGTON, Va.—In a letter to President George W. Bush, American Trucking Associations President and CEO Bill Graves called on the White House to release oil from the Strategic Petroleum Reserve (SPR) in an effort to curtail the ongoing, historical run-up in crude oil prices which are hampering various sectors of the U.S. economy and the trucking industry.
This letter comes one week after the ATA projected a record high diesel fuel bill for 2008, stating that the trucking industry is on pace to spend $135 billion on fuel in 2008—based on current fuel price forecasts. The ATA also said this estimate represents a $22 billion increase over the $112.6 billion spent on fuel by the trucking industry in 2007.
And the impact rising fuel prices is having on trucking—and all other modes of freight transportation—is evident based on the Department of Energy saying yesterday that the average price per gallon for diesel fuel is now $3.989 per gallon, an increase of 1.5 cents from last week’s$3.974, and an overall increase of 70.9 cents in the last five weeks.
Along with diesel prices rapidly approaching, crude oil is consistently being priced at more than $100 per barrel, and this run-up has forced motor carriers to make fuel their top operating expense rather than labor, according to the ATA.
“As the price of oil skyrockets, it not only devastates truckers but their customers as well, many of which are mom-and-pop stores, and ultimately the consumer,” Graves said in his letter to the President. “We are very concerned that out-of-control energy prices will greatly magnify our current economic slowdown and delay our economic recovery….Please help not only the trucking industry, but the entire economy by trying to burst the bubble in the crude market by releasing oil from the Strategic Petroleum Reserve.”
Graves added that any policies the White House can implement to slowdown the spike in oil prices are needed. And he added that releasing oil from the SPR can be viewed as a major policy action. Crude oil inventories are not the problem, said Graves. But, he noted, “the oil market is no longer functioning on supply-and-demand fundamentals as many hedge funds drive up the price of crude based on based on speculation. We need something to break that chain, and a SPR release could do it.”
The current situation regarding the escalating oil and gas prices potentially may have a long-lasting and damaging effect on the trucking industry, according to Cliff Lynch, president of C.F. Lynch & Associates, a Memphis-based supply chain and logistics consultancy.
“For a long time we have lived with this [increasing oil and gas prices], but we really have not worried about it too much,” said Lynch in an interview. “It is not like it is just a few more cents per gallon we are talking about anymore. And it is getting to the point now where it is a serious drain on the motor carriers, especially the owner-operators with 200-to-300 gallon tanks to fill for $1,000 or more per truck.”
ATA Spokesman Clayton Boyce said that the current situation has been “very difficult” for many small trucking company owners, which has forced some to park their trucks and others to consider filing for bankruptcy.
“The smaller the company, the bigger the effect is generally what we are seeing,” said Boyce. “The smaller carriers tend to not be as effective is padding along the costs of the fuel to shippers.”
Lynch added that in time this situation may lead to a capacity shortage, because many carriers are not going to be able to afford these prices to remain on the road. And he said that standard fuel surcharge programs were never configured to deal with what carriers and shippers are facing now with the current run-up.
“Everyone thought they would see an increase of a few cents per gallon…now we are seeing a constant run-up with a [fuel surcharge] time lag on it, and it is a nightmare,” said Lynch. “We are past the point where something needs to be done. I am not a big fan of government intervention, but there is a time when somebody has to do something and the government is the only power in position to do it.”
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Thank you for the letter. I help run a recycling company. Much of our service is daily route collections from various companies in our service area. The out of control gas increases have our office staff adjusting and re-adjusting fuel supplement charges till' they spin. It is no longer becoming an issue, it already has become one. It is time for action, from legislative powers who have the power to step in. It's not just a trucking industry issue we all will feel the fall out with this issue as daily essentials which need to be tranported to here and there will be out of a lot of peoples means. Not to mention the money spent on entertainment will be re-directed to the essentials, that sector of the economy will suffer. It will definitely have a spiral effect across all lines unless the issue is met face to face.
Kevin Winn - 2008-26-3 23:32:00 EDT -
Everything that Americans can physically touch is hauled with a truck. Most people do not realise that a semi does not get the mpg that cars do. I am sure it is the same with other large vehicles that help transport everything we touch. I complain that it cost me 10 dollars worth of gas to get to work, not thinking that the same trip would cost 40 dollars in a big truck. Everything that causes the cost of delivering goods eventually works it's way down to the consumer. If people do not want to pay more for their shoes and hot dogs, and be able to afford trips to Grandma's house, they need to speak up. I help run a trucking company, and all we are paying for is fuel and labor. The smaller companys are treading water only. Many large companys have folded over the last year. Surely no one will have the money to renew their tags this year.
Cindy Mangiafico - 2008-26-3 20:42:00 EDT -
What baffles me is the total lack of concern, questions, or intervention of any kind, whatsoever, from our current government. Our government has always intervened on behalf of the American people in the past with issues like this. For our government to turn a deaf ear to the overzealous price hikes is a slap in the face to America. $4.50+ diesel & 3.75+ Gas in the current pricing trend, is going to have a trickle down effect on the consumer in a bad way. These price hikes are out of control and currently it looks like no one (especially anyone in the white house) wants to step up and take on that challenge. For being the strongest nation on earth, we certainly are not acting like it.
Note; 51% of all fuel manufactured in the U.S. is consumed by the transportation industry, Truck, Train, Air, Ship. (Easy to see why they are targeting Diesel)
John Fankhauser - 2008-26-3 15:01:00 EDT -
Thanks to Bill Graves for using our collective voices to be heard in Washington. Although the Energy Policy has allowed for abuses in the marketplace(surely China and India''s growing demand has not just been in the past 6 years), it''s up to the people of America to voice their displeasure in our policy to all representatives in state and national government, it''s up to us as citizens to also voice our displeasure and ask for relief and a better rounded policy.
kirk anderson - 2008-26-3 14:04:00 EDT -
We are a small trucking co. and the affect that the fuel prices are having on us is and outrage . We have worked hard for every penny and we have put up with every slap in the face possible but we continue to sruggle to put products on the selfs and keep toilet paper on the rolls if this keeps up not even president bush will have toilet paper or bread and for sure no one will eat out has we deliver those products. thanks for letting us vent
truck driver - 2008-25-3 20:09:00 EDT
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