‘We are going to have a lot of bankruptcies’

Independent trucker Michael Whitaker gears up for his next shipment of equipment from South Carolina to Arizona. Whitaker has been an owner-operator-trucker since 1998. His specialty is the transport of industrial machines such as construction and agricultural machines.

“The diesel prices. That’s the biggest expense for any truck driver, it’s diesel,” Whitaker said of the recent hike in diesel prices.

Whitaker says it cost $600 or $700 to fill his truck’s tank at the beginning of the year. Now he pays about $1,000.

“You notice it in your pocket, oh yeah,” says the truck driver from Iowa.

The price of diesel has soared since the outbreak of the war between Russia and Ukraine. Diesel averages reached their highest level since 1994 in mid-March.

Whitaker says he charged about $5/mile on certain routes. Now he charges between $7-9 per mile. He also uses a discount fuel card and an app that identifies the most economical stations where he can refuel on his routes.

While the industry standard is to apply a fuel surcharge to freight charges, drivers don’t always see that money passed on to them.

“We assume they… [drivers] would all receive fuel surcharges. And that’s not always the case.” Todd Spencer, president of the Owner-Operator Independent Drivers Association, told Yahoo Finance.

“Sometimes others, that’s middlemen, or something like that in freight forwarding. They can keep some of it, they can keep it all and not pass it on. Now that happens too. It shouldn’t, but it does,” Spencer said .

Last Monday, the cost of diesel was $1.94 higher than a year ago “which is significant,” Spencer said.

“For our guys, the majority of truck drivers will burn between 18,000-20,000 gallons of fuel a year. So if you look at that cost, you’re talking about $90,000-$105,000 a year in fuel alone,” he added.

West Texas Intermediate (BZ=F) and Brent International (CL=F) fell Monday and Tuesday, providing some relief for diesel futures. But both benchmarks are still above $100/barrel, and global inventories of the fuel used by trucks and trains have been extremely tight of late.

Most “goods are transported across the country by truck and rail using diesel fuel to power their engines, and diesel prices are rising more than gasoline prices,” strategist Andy Lipow wrote in a recent email to investors.

“Fed Ex (FDX) UPS (UPS) and Amazon (AMZN) delivery services are all affected by rising diesel prices, and they will eventually have to increase their rates,” he added.

A Morgan Stanley analyst raised its estimates for Amazon’s transportation costs by $6 billion to account for higher diesel prices.

Whitaker says he remembers the gas crisis of the 1970s and the recession of 2009. He fears that some owner-owned operators will not survive with such high costs.

“I think we’re going to have a lot of bankruptcies from individual drivers, haulage companies,” Whitaker said.

“If you don’t manage your money, you won’t be in business for long,” he said. “When the going gets tough, you need to have enough money saved to get you through the tough times.”