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Trucking firms are seeing their profit margins shrink as diesel fuel prices rise and wholesalers and retailers both balk at covering the higher cost.
The price of diesel fuel, which most commercial trucks use, jumped $1.10 a gallon in the two weeks after Russia invaded Ukraine to reach a national average of $5.25 on 14 March.
The price had edged lower the following week but remains at least $1.50 more than at the beginning of this year and has added hundreds of dollars a week to the operating cost of semi trailer trucks, The Wall Street Journal reported.
Crude prices are forecast to rise to $150 a barrel or more this summer (see related story in this issue).
Trucking firms usually apply fuel surcharges to cover fluctuations in diesel’s price. Those surcharges now average 43 cents per mile, compared to 19 cents at the start of this year, Truckstop.com reported.
The squeeze is especially painful for small companies, which have less leverage to negotiate higher freight rates from customers.
“We find ourselves diving into our margins to support operations, to keep the wheels turning, quite literally,” Derek Crusenberry, director of business development for JSG Trucking in Acampo, Cal., told the WSJ.
Because customers have pushed back against paying higher freight charges, the company has delayed some expenses, including repairs on some equipment, he said.
TREND FORECAST: The upside risk of higher oil prices outweighs the downside potential. Thus, as oil prices rise higher, their higher costs will increase the prices of products and services which will be pushed onto businesses and consumers.