Industry professionals talk about the diesel market and its effects
With diesel prices and in many other ways, the trucking industry is multifaceted.
Owner-operators, long-haul drivers, flatbed truckers, tankers and heavy haulers can each approach their business in a very different way.
What may be good for one may not be good for another and vice versa.
Land Line spoke with owner-operator Gary Frederick of GNR Transport Inc., as well as Dimitre Kirilov, President and CEO of Montway Auto Transport for their perspective on how record diesel prices have affected businesses.
Montway Auto Transport is one of the nation’s largest auto transport companies, according to the company’s website. The Schaumburg, Illinois-based company specializes in shipping vehicles for individuals and businesses across the country. Car dealers, military personnel and online car buyers are among the company’s customers.
Kirilov has 15 years of logistics experience and started his career in the trucking industry.
Frederick owns two trucks and usually runs coast to coast from his home base of Sebring, Florida to Portland, Oregon.
“I’ve been in business for 35 years and I’ve never seen a diesel market like this,” Frederick said. “2008 was tough at the time, but there was a ceiling you could see. If you could feel it was going to go down or at least stay flat. My fuel bill just went up to $4,000 over three weeks for the same trip.
Similarly, Kirilov did not expect diesel prices to reach the levels they have this year. However, he remains convinced that the market will rebound.
“By far, supply and demand affect rates the most,” Kirilov said. “Diesel prices are only part of what really affects transport pricing.”
Diesel increases have been significant, but increases in the company’s running costs are only around 20%, Kirilov said.
“We have two customers: shippers and carriers,” he said. “It’s important that they both get fair treatment. We are only in business because of them. Our goal is to make it profitable for both. We constantly monitor the market to ensure that we offer the market price. In the end, it depends on the fleets. They need to make sure they book what is profitable for them.
Adjusting your business when conditions require it is key, Frederick said.
“You have to be careful what you spend your money on,” Frederick said. “You have to calculate your taxes, insurance costs, etc.,” Frederick said. “Do you know how much it costs you for fuel right now? It’s day to day, almost hour to hour lately. I may have to pick up an extra load here and there to get money for fuel to get back east. Some drivers jump on every job because they have a truck to pay off. When this happens, these people do not realize that they are deceiving themselves.
Knowing how to find a good rate is especially important these days, as is maintaining your truck.
“It’s hard to get money out of your pocket, especially with rising costs, but you have to keep up with your upkeep so you don’t cost it later,” Frederick said.
While Montway’s business has remained stable, Kirilov said he is well aware of the challenges others are or could face.
“Especially for smaller carriers, the market is critical,” he said. “Freight has steadily increased over the years. Global inflation will affect the customer with prices, and diesel costs don’t help at all. Even though shipping costs are not increasing, we use fuel in other ways, such as heating, machinery and electricity. One way or another, high costs will affect the market.
Kirilov said his company’s tariffs do not directly reflect rising diesel prices.
“It’s still a negotiation, but the prices are determined by the market,” he said. “We’re not just saying that if diesel prices go up, we’re going up the price. The market is cyclical.
A volatile diesel market on the heels of an increase in carriers is a bad combination, according to Kirilov.
“Around 100,000 carriers came into the market last year to take advantage of extremely high demand,” he said. “During the (COVID) shutdown, shippers were also taking advantage. When that demand drops, which is happening now, they could run into trouble if their fleet isn’t fuel efficient enough. It also becomes much more difficult to trade when demand is down.
Some 20,000 drivers were licensed in February 2022, Fredrick said. Not only does this number amplify competition, but it can also negatively affect pricing.
“Trucking may be a dog-eat-dog industry, but I like competition,” Frederick said. “However, it becomes inundated with brokers and the charges go to whoever will do it for the lowest amount. They live aboard freight and think that’s what the rest of us do. I’m not against coming new people in the industry, but there has to be some sort of control. They come in for quick bucks, and they’re not even properly trained. I can stay out of this because I have good relations with the people I transport.
Relationships are key, whether you’re an owner-operator or one of America’s largest auto transporters.
Montway’s website says the company has built its reputation on providing superior customer service.
Kirilov said he thinks this will be essential as the industry suffers from these higher diesel prices.
“The companies that survive will have a good record and treat the customer the right way,” he said. “If you’re in the business to make a quick buck and you don’t care about the customer because there’s another one around the corner, what will make you different? The way you treat the customer will make the difference.
Relationships notwithstanding, Frederick is surely not alone as he assesses higher diesel prices and the future.
“There’s not one thing you can put your finger on to solve this (diesel price) problem,” Frederick said. “I have to go 110 km/h and tell the customer in advance that they won’t be getting service from coast to coast in four days. Other than that, you can’t do anything. This is why we are all frustrated. I don’t know how they think we can do a job just by moving a truck from place to place. I still have bills at home, and those bills are all going up. Trucking is a tough industry and a tough life. At some point, I’m going to have to say that I’m not going to do it anymore. LL