America’s long-haul truckers were already struggling. Then came $5 diesel

 

New York —  

Jamie Hagen believed the Great Freight Recession was finally over.

Last year was a tough one for his South Dakota trucking company, Hell Bent Xpress. He was thinking about shutting down, his cash drained in the lean years that followed America’s post-pandemic shopping spree.

But he refinanced his equipment, wagering demand would pick up and freight rates would rise again. “We started seeing some real progress. There was a lot of hope,” he said.

Diesel, the largest day-to-day expense in trucking, has jumped 41% since the start of the war to a national average of nearly $5.38 a gallon. The rise in oil prices is rippling through the US economy. Gas prices have jumped for drivers and grocery bills may soon rise.

Small fleet owners like Hagen and independent owner-operator drivers are hit hardest by the oil spike in the for-hire trucking industry. They typically own their rigs, pay for fuel and maintenance and find freight on the volatile spot market, where shippers post one-off loads for carriers to transport.

Small truckers aren’t making money fast enough from these rates to cover their higher diesel costs.

Large carriers like JB Hunt and Schneider National are less exposed to the pressures he’s feeling.

They have long-term shipping contracts with fuel surcharge clauses that adjust automatically when diesel increases. Big carriers often run more fuel-efficient trucks than small operators and have sophisticated fuel hedging strategies.

Most small operators don’t get these fuel surcharges. Rates on the spot market are negotiated “all-in” without a carveout for fuel. Small operators are lucky to recover half of higher fuel costs in their rates, said Dean Croke, principal analyst at DAT Freight & Analytics.

“Small guys in spot market are really getting dumped on right now,” he said.

Truckers also often don’t get paid for months after hauling a load. Large carriers with working capital can manage, but it’s brutal for small operators facing thousands of dollars extra in fuel costs today.

“Cash flow is becoming our biggest issue,” Hagen said.