Northern California trucking business strains under soaring diesel prices, tough driver recruiting
As president of a logistics and warehousing company with about 300 big rigs rolling in seven states, Andrea Biagi is worried about soaring costs to fuel them and how to keep and attract talent who drive them.
Even as her company is assessing the real-world benefits of zero-emissions fleet, it and the entire U.S. trucking industry is reeling from unprecedented inflation in diesel prices since fall 2020. Costs have well past the $5-a-gallon previous peak in summer 2008 amid the global economic crisis, according to the latest federal data.
The California average retail price of diesel for highway use jumped in the past 12 months by 68.6%, or by $2.80 a gallon, to $6.89, according to June 13 data from the U.S. Energy Information Administration.
That’s well above the national average price of $5.72 a gallon, which was 74%, or $2.43, higher than a year before. Dwarfing California’s price jump was that of New England, where the diesel average rocketed up 91%, or $2.90 a gallon, and concerns have been growing of a fuel shortage.
“It’s a huge financial impact, like it is for the average consumer,” Biagi said.
With the price surge, the company’s fuel bill for the first five months of this year is already $100,000 higher than that time frame last year, she said.
Trucking companies and others with fleets of diesel vehicles often don’t pay retail station prices, opting for commercial cardlock fueling centers or bulk deliveries.
Biagi Bros. has multiple fuel tanks that can hold as much as 1,000 gallons of diesel distributed among its 3.5 million square feet of warehouses and distribution centers in Napa Valley, Southern California, Washington, Arizona, Texas, Oklahoma, Illinois and Florida.
The company often pays 50 cents to $1 a gallon less for bulk fuel than retail diesel prices, which are topping $7 a gallon in various North Bay locales.
“We watch the prices, and then even if (a tank is) half full, we'll buy (fuel) if the price dips a bit,” Andrea Biagi said. “But we don’t have capacity for a month’s worth of fuel.”
Fuel surcharges are common in the logistics business. They are intended to create an average price of fuel to offset fluctuations that can happen from day to day, even outside of an inflationary economy.
The surcharge typically is based on such factors as the weekly federal regional pump survey price, fuel mileage (typically 6 miles per gallon with a loaded trailer) and a carrier’s base fuel price (cost of operation per mile). Carriers often represent it as a per-mile surcharge or a percentage of the total freight charge.
“I’m charging a 61% fuel surcharge, and that’s not high enough,” said Adam Doss, president of Santa Rosa-based Doss Logistics, noting that it isn’t applied to such add-on charges as a tarp over a load.
A year ago when the California retail diesel average was $4.08 a gallon, the company surcharge was 33.75%.
“I've outpaced all my customers’ fuel-surcharge sheets. We’ve had to keep running the numbers up,” Doss said. “It affects tires. It affects filters. It affects every polymer in the truck. And it affects my drivers, the ones that live so far away. We're having more sick days, because they just can't afford to get to work.”
Some drivers, who had been eager to travel as far as 40 miles for jobs based at one of Doss’ six truck terminals in Northern and Southern California and Phoenix, are now looking for opportunities closer to home. From 120 drivers at the beginning of the year, the company is now down to about 100.
The cost of fuel is throwing conventional logistics company budgeting out of whack. An industry rule of thumb has been for one-third of company cost per truck to be allocated each to fuel, driver and vehicle. But Doss is now having to plan for fuel costs to amount to about 40%.
And with more driver incentives, the higher fuel cost is pushing the budget for the fleet lower.
That’s on top of a shortage of large trucks for over a year, which is leaving carriers with fewer options for rentals if a fleet truck breaks down.
“A lot of people are holding onto equipment and parking their trucks to make their own rental fleets,” Doss said. His company has one truck per terminal set aside for that purpose now, to avoid leaving customers without shipments and drivers with fewer wages.
The trucking industry is somewhat divided on how many new truckers are needed.
American Trucking Associations, which represents the industry’s largest carriers, late last year estimated that the country needed 80,000 more drivers, noting that the profession has an aging, almost entirely male workforce.