Sunday, July 27, 2008

High Fuel Prices Are a Boom to Independant Truck Drivers

Due to my personal experience, reason and common sense, it is clear to me that independent truck drivers (owner operators), are reaping windfall profits as a result of the recent skyrocketing prices of diesel fuel. The only thing that I find mysterious, is that I am constantly hearing reports in the mainstream media that independent truck drivers are suffering due to the high cost of diesel fuel, and that many are unable to keep up with their loan payments. I see heart-wrenching interviews with owner operators who claim that their trucks are being repossessed because they are unable to make their truck payments because of the high price of diesel fuel. When owner operators are asked, they dutifully report that their truck has two 150 gallon fuel tanks, and at $4.50 per gallon, it costs over $1,200 to fill-er-up. At 5 miles per gallon, they need to fill-er-up at least every two days with monthly fuel bills reaching nearly eighteen thousand dollars. They go on to say that they are taking a double hit, because the price of food and consumer goods are also skyrocketing because of the high price of fuel that is necessary to bring those items to the marketplace.

Have you noticed the obvious contradiction in the truck owners' statements? It is clear to me, but for some reason the interviewer never calls them on it. Either this contradiction sails right over their heads or the obvious truth does not fit the media's template, which is clearly to portray these blue collar working stiffs as the unfortunate victims of rich heartless corporations, like the oil companies.

If you too have been fooled by this media propaganda, and have been unable to figure it out for yourself, I will break it down for you to make this contradiction crystal clear. First off, the obvious contradiction is that these stories always make clear that the cost of living is rising due to the high cost of fuel being passed on to the consumer. This is because trucking companies and independent owner-operators charge their customers a "fuel surcharge" due to the rising cost of fuel. This fuel surcharge is tied to the current price of fuel.The higher the price of fuel, the higher the surcharge. The fuel surcharge more than compensates for the truckers' for the increase in fuel costs. When fuel prices increase, so does the surcharge, which actually decreases the independent truckers' net fuel cost. Therefore, as fuel prices rise, so do the truckers' profits. Currently fuel surcharges average 48 cents per mile. If a truck averages 5 miles per gallon, the owner-operator is getting reimbursed $2.40 for every gallon used by adding the fuel surcharge to his customers' freight bill. This effectively reduces the net fuel cost to $2.10 per gallon at a pump price of $4.50 per gallon. It would effectivly cost only $630.00 to fill up a semi with two 150 gallon fuel tanks after taking the fuel surchage into account. This fuel surcharge actually reduces fuel costs to independent truckers to prices not seen in over a decade.

You may ask: if it is not due to the high cost of diesel fuel; why are some truck drivers being forced out of business? The answer is simple. At any given time, some business owners, even in highly lucrative fields, are always going bankrupt for various reasons. These reasons always include the fact that their expenses are higher than their income. Over a period of time, they are unable to pay their bills and are forced out of business by their creditors.

I believe the truck drivers told the truth when they said that they were forced out of business because they couldn't afford to pay both their fuel bills and make their loan payments on their truck. But the rise in the cost of diesel fuel is clearly not the reason. As a matter of fact, the increase in the cost of diesel actually increased the income of independent truck drivers, as well as trucking companies in general, due to the fuel surcharge. It is clear to me that the owner operators who couldn't pay their fuel bills and truck payments simply did not have adequate income to cover their expenses for any of a number of reasons. Common reasons for independent truck drivers earning inadequate income include: not driving enough hours per month(goofing off, sleeping late, or just staying home too much), accidents (causing down-time and repair costs), poor truck maintenance (causing breakdowns, repair costs and down time), hiring unreliable drivers to drive their rigs so that they can take time off. Also, some truck drivers spend excessive time and money on vices, such as gambling, patronising prostitutes and illegal drugs. These vices cause less income, due to the time they devote to these vices instead of driving, and also higher expenditures associated with these extra curricular activities. There are many reasons why some independent truck drivers are unable to pay their fuel bills and truck payments. However, the rising cost of diesel fuel is not among these reasons. Because of the fuel surcharge, independent truck drivers are better off today than they were before the price of diesel shot up.

I happened to have had a similar personal experience in the late 1970's during a similar period of sudden and dramatic fuel price increase. I worked as a taxi driver in New York City at the time. I remember fuel prices doubling in a short period of time. Since I leased my cab on a daily basis, as is the practice for most cab drivers, I was responsible for paying my cab lease as well as my gasoline costs every day. When the fuel prices doubled, my average daily cost for gasoline doubled from about $12.50 per day to $25.00 per day. When fuel prices suddenly skyrocketed in the 70s, the city allowed all taxi-cabs to charge passengers a fuel surcharge of an additional 50 cents per trip. At the time, I remember making an average of 40 trips per day. Business did not decline due to the fuel surcharge and I continued to average 40 trips per day. However, I now netted an additional 20 dollars per shift due to the fuel surcharge and my fuel costs only went up an average of $12.50 per shift. My net cost for fuel was reduced to only $5.00 per shift after the fuel surcharge. I actually earned about $7.50 more per shift due to the high price of fuel and the subsequent fuel surcharge. Before the price of fuel skyrocketed, I averaged 100 dollars profit per shift (after paying my lease and fuel). After the cost of fuel doubled and the subsequent fuel surcharge, I now earned about $107.50 per shift, an increase of 7.5%.

At the time, I remember seeing many news reports about how the high price of fuel was putting the squeeze on cab drivers. I saw interviews with cab-drivers who claimed that they were often unable to pay their leases after working a 12 hour shift because of the high price of fuel. At the time, I knew several cab drivers who frequently were unable to pay their lease at the end of their shift, but the reason was always because they spent their shift at the racetrack, a bar, or they spent their money on dope and were too stoned to drive. Frequently, these drivers would blame the high cost of gas for their own failings. I often wondered why the media would always put deceitful excuses on the news reports, rather than reporting the truth that cabbies actually got a raise as a result of the skyrocketing fuel prices and subsequent fuel surcharges that were passed along to the ultimate consumer. Cab drivers were actually doing great during due to the high fuel prices of the '70s, but the media reported them as struggling victims.

Why does the mainstream media portray truck drivers and cab-drivers as victims, even when they reap increased profits due to the sharp rise in fuel prices and subsequent fuel surcharges? It seems to me that the media likes to sympathize with the little guy, even when he is a victim of his own failings. Time after time, I see the media go out of its way to avoid the obvious truth and seek out the least likely scenario that offers sympathy where it is not deserved. The unspoken truth is that most independent truck drivers are enjoying record profits during this period of record high fuel prices.

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