Diesel Gasoline Hits $5 a Gallon What Happens If Truckers Strike?

June 20th, 2008 @ MReed // 9 Comments

Thousands of years from now, when human kind looks back on the “ancient Americans,” the way we look back on The Romans, one thing is certain: our delivery and transit systems will be heralded as one of our greatest accomplishments.

As gas prices soar, and the cost of food and consumer items is one the rise, one starts to wonder: what if the cost of high oil causes a strike or temporary shut down of our trucking systems?

Sound far fetched?

Such a strike has already happened once this year, on April 1st, when 1,000 or more independent truckers decided to shut down for the day.

Diesel fuel was only 4 dollars a gallon at the time of the strike.

Diesel gas has risen over 300% in 6 years. In 2002 The price of diesel was $1.25 a gallon, now the national average is almost 5 dollars, costing truckers $1200 or more to fill their tanks. With most analysts saying that there is no end in sight, come this time next year we could be looking at $7 or $8 dollars a gallon.

Coupled with the cost of insurance $6000-8000. It’s becoming nearly impossible for the small independent trucker to stay on the road.

The Teamsters union, who represents a number of workers, including truckers, posted the following on their website, June 13th:

“Oil prices are hitting U.S. airlines hard, forcing layoffs, service cuts and price increases. One major reason oil prices are breaking records is rampant speculation on the energy markets.

The Teamsters strongly support legislation on Capitol Hill to bring down fuel prices by curbing speculation.

General President Jim Hoffa sent a letter to House and Senate leaders urging reform of the energy commodities market. Also signing the letter were consumer, business and farming groups.”

Click here for a copy of the letter they sent to congress.

America’s trucking network is the lifeblood on which this great nation thrives, before the internet or the tech boom, before cable television or any television for that matter, we had trucks. Our unparalleled delivery system, built over the last 100 years, is what allows this country the quality of life we are accustomed to.

Look around you. Every piece of everything in your office, living room, or anything else man-made has been trucked from somewhere.

Ben Evans is the president of Mass Logics, a company that provides software to the trucking industry. Specifically, they make logistics software. In a recent interview, he offered a bleak but hopeful outlook on the current state of the industry.

How are the current gas prices affecting the industry?

“The impact is two-fold. First and foremost, it costs more to operate. Fuel used to be 20% of the operating cost of a truck, now it’s about 60%.

In most cases the price of transporting the goods has barely increased enough to cover this additional fuel cost. Even businesses that are able to increase pricing to keep up are still losing profit margin, decreasing the value of their businesses. Secondly, consumer confidence is low (upcoming election, housing crunch, high gas prices) causing fewer goods to be purchased by consumers.

Fewer goods sold directly translates into fewer loads for the transportation industry. Fewer loads either drives transportation prices down or puts smaller companies out of business.”

What would happen if truckers were to strike?
Is that a possibility?

“A brief one-day strike has already occurred. The impact of which was probably not all that evident. A real strike would have to last more than a day to have a real impact, but the likelihood of that is low. The industry is not united enough to be effective with a strike. The more effective strategy is to simply stop operating trucks at or below cost. As long as companies, small or large, continue to operate trucks for prices below profitability, the industry will suffer.”

Who is hit the hardest by the rising gas prices?
“Independent truckers and small trucking companies who have difficulty raising prices without fear of losing their customers. Every successful business must be able to react to market forces and adjust prices accordingly. However, in times like this when the work load is low and truck capacity is high, raising prices is not an easy option.”

Is there any relief in sight? What is the industry doing to deal with 6 bucks a gallon diesel fuel?

“The transportation industry will always have a bright future, even at $6 or $7 per gallon for diesel fuel. This is one of the few industries that cannot be exported overseas or replaced by technology. As long as products are manufactured and sold in this country, they must be moved from place to place. However there will be a period where work is low, and pricing is unstable, which will cause the industry to shrink some. Once the fuel price stabilizes and consumer confidence returns, the industry will bounce back and grow again.”

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But we must ask ourselves, “How long will it take for the market to bounce back?”

What is going to happen in the mean time? Products are skyrocketing while consumer confidence dwindles. Just as average people are cutting into their budget to pay for the high price of gasoline, truckers are having to cut into their profits.

If prices to continue to rise, is there a threat of truckers going on strike or even worse out of business?

It is obvious that in order to continue to receive the goods we depend on, truckers must not be left holding the bill.

While oil companies are defending record profits in congress, the “little guy,” the independent trucker. is getting run off the road. A supply shortage due to less transportation, coupled with an increase, or even steady demand, could mean a disaster not only for the trucking industry, but for the everyday American as well.