Throughout the last several months, the steady increase in diesel fuel prices has created a hectic pricing environment in the freight industry due to the inability to accurately factor in fuel costs for bidding months, or even weeks, in advance of hauling the load. This inconvenience already has the potential to be very costly, but what if the driver is turned away at the station where he or she intends to refuel because there is no diesel at the pump? Yes, this is a real possibility in today’s environment.
Certain locations are more prone to these shortages, mostly due to price differences from state to state. For example, diesel is a whole dollar less expensive in Arizona ($3.65 per gallon) than in California ($4.65 per gallon). As such, fueling stops will be planned to take place in Arizona. When this purchasing bias is repeated on a large scale, the state with the better prices faces a shortage of diesel.
This lack of consistency among states, accompanied by the steep spike in diesel prices that reached a seven-year high, plus the decrease in production and lack of hazmat-endorsed fuel haulers, are all contributing factors in a potential looming fuel crisis. As the cost of operation rises, so does the price tag on any one load. This price increase is happening unpredictably across the country and is causing concern among carriers and owner-operators alike.
As we know, owner-operators take on massive responsibility by purchasing, maintaining, and operating their own equipment. Often loads are bid for months in advance; however, with today’s fuel price fluctuations, advanced bidding is more risky than usual. These fluctuating fuel prices can cost an additional $300-$400 on a coast-to-coast load. This can cause awkward bargaining between owner-operators and their longtime customers who might not fully understand why their shipping costs are suddenly going up.
Thankfully, today’s market capacity is such that carriers have the upper hand when it comes to negotiating prices. The use of a fuel surcharge to offset the extra burden placed on the carrier or owner-operator keeps trucking from suffering big losses.
Despite the downward spiral that is this diesel shortage, there is help on the way. The federal government has recently pledged to open oil reserves, releasing 50 million barrels in hopes of offsetting the continuing price spike. This high-volume release from the nation’s strategic reserves should do some good in the fight against price inflation in the trucking industry.
Another helpful factor comes from an unusual source – the COVID-19 Omicron variant. When the variant was discovered over the week of Thanksgiving, fuel prices took a nose dive for the first time in quite a while. Crude oil dropped $10 per barrel on Friday, Nov. 26. This decrease in the price of oil is expected to trickle over into fuel soon as it has already decreased the national average of gasoline by three cents per gallon.
While times of uncertainty like these can be troubling, what goes up must come down – or at least level off. The price climb is expected to slow in the first quarter of 2022 and is projected to lower to a national average of $3.09 in middle and latter parts of the coming year. This projection inspires a sigh of relief as we head into the new year with hopes of low and stable fuel prices.