Soaring fuel prices leave owner-operators with tough choices

From Freight Waves.

Avery Vise, vice president, trucking for transport consultancy FTR, has some advice for owner-operators struggling with a massive spike in diesel fuel prices and plunging spot market rates: “There are good reasons to sell your truck and become a company driver,” Vise said.

Under the circumstances, it wouldn’t be surprising if some of the 350,000 registered owner-operator drivers seek the protection of company driving, or lease their independent services to a fleet, the latter of which 44% of members of the Owner-Operator Independent Drivers Association (OOIDA) already do. “It’s not happening yet, but it’s coming,” said William “Lewie” Pugh, an OOIDA executive vice president who worked as a leased owner-operator for 24 years, said of free-agent independent drivers either leaving the business or deciding to change the way they operate.

For owner-operators, the fat city of the past two years has lost some weight. As of this past Monday, on-highway diesel pump prices were at $5.61 a gallon nationwide, according to weekly data from the Energy Information Administration (EIA). That was down a penny a gallon from the prior week, but still at near record levels. Diesel prices in the New England and mid-Atlantic regions, which are experiencing acute shortages of diesel, continued their climb. Prices in New England hit $6.43 a gallon, according to EIA data. Prices in the mid-Atlantic were reported at $6.38 a gallon. (EIA next updates its tables late on Monday.)

Meanwhile, spot prices for dry van services have collapsed, falling an eye-popping $1 per mile year-to-date, as concerns rise that the pace of the pandemic-driven pull-through of consumer buying is leveling off. According to data published Monday by KeyBanc Capital Markets, dry van spot rates, ex-fuel, are down 30% from their late 2021 peak, off 25% year-over-year and are at a 15% discount to contract rates, which typically lag spot moves by 3 to 6 months.

KeyBanc Transportation Analyst Todd Fowler said spot rates could fall another 15% to 20% before reaching breakeven operating costs consistent with declines in prior cycles.

See the complete article online at Freight Waves.