At more than $5 per gallon, diesel fuel has surpassed even the historic peak of $4.70 in July 2008. Depending on the outcome of the war in Ukraine and the resultant sanctions on Russian oil, we may see prices head into previously unimaginable figures.
The U.S. is less dependent on Russian oil than other nations, particularly those in the European Union, but the impact on transportation is already being felt. Fuel surcharges — which usually insulate truckers from rising costs — are lagging as prices spike faster than anyone can keep up with, says Frank Granieri, chief operating officer of supply chain solutions at Northeast logistics provider A. Duie Pyle.
Fuel is typically the greatest expense of running a truck, and even for large fleet operators, it ranks in the top three, according to American Truck Business Services.
Because fuel surcharges are tied to national and regional metrics released by the U.S. Energy Information Administration (EIA) every week, the surcharges being applied to invoices, typically the following week, are lagging the actual costs of purchasing fuel. For example, the average U.S. diesel fuel price jumped a record 29% to $5.25 per gallon from Feb. 21 to March 14.
“In January, our fuel costs exceeded our fuel surcharges,” Granieri says. “It’s the first time I’ve ever seen it. It’s simply because of how quickly fuel costs are increasing.”
As February prices continued to spike, Granieri wondered what the carrier could do in the short-term to mitigate costs.
One thing is to put a bead on idling. Like most major operators, Pyle has an ongoing initiative to reduce idling time, but they’ve now increased the emphasis on measuring that time.
“One thing fleets control is idle time,” Granieri says. “It sounds simple, and it is. But a lot depends on the type of fleet you have. If you have a long-haul operation where you’re running cross-country, idle time is going to be less than if you’re running dray out of New York and sitting in a yard for an extended period of time.”
Efforts to cut fuel consumption rely heavily on driver discretion, so “there’s a need to nudge them toward good behavior,” Granieri says. For example, Pyle often sets its trucks’ cruise control speeds slightly higher than can be achieved using the manual pedal, so that drivers prefer using cruise, which saves gas.
Granieri says he’s seen drivers respond with enthusiasm and curiosity about ways to mitigate price spikes, such as questioning whether it’s more cost-efficient to fuel at specific locations.
“A lot of our business is blocking and tackling,” he says, adding that smaller or independent truck operators have it especially hard, as it’s harder for them to pass on the increased costs.
For the future, Granieri sees great potential in harnessing the power of technology that’s designed to make truck transportation cleaner, leaner and less costly. Pyle is developing software to identify backhaul opportunities and decrease empty miles.
“I think there’s a tremendous amount of improved efficiency available via technology,” Granieri says.
