Rising Freight Truck Rates: Causes & Effects
by Apex Capital | May 10, 2012
During the past few years, various factors have pushed the cost of transporting goods by truck significantly higher. The U.S. per-mile rate increased to approximately $2.55 in 2012, according to the Freight Rate Index. Each mile cost $0.65 less in December 2008. Most of this revenue pays for fuel, equipment and employee compensation.
This has a major impact on businesses that need to transport goods or obtain them from other companies. Trucking expenses contribute to higher prices in stores and restaurants. For some retailers, this results in fewer sales. It also puts pressure on suppliers to produce smaller products and avoid transporting them long distances by truck.
High costs harm the trucking industry to a significant degree as well. The City Wire recently reported that USA Truck lost nearly $5 million in the first quarter of 2012. The loss was attributed to high fuel costs and driver shortages. USA Truck also indicated that its tractors travel more miles with empty trailers than they did in the past.
The price of diesel fuel is a major factor in the cost of trucking services. The Energy Information Administration reported that diesel cost about $4.06 per gallon in May 2012. This expense has increased rapidly during the past two years. In 2011, it averaged 22 cents less per gallon. The price remained below three dollars in September 2010.
Costs of Trucking
Truckers also earn a substantial income. Employers paid truck drivers an average of $18.16 per hour in 2010, according to the Bureau of Labor Statistics (BLS). The Journal of Commerce reports that pay increased by 4.6 percent between April 2010 and April 2011. The wages of supervisors, repairmen and other staff also add to the cost.
The BLS forecasts that demand for trucking services will grow significantly between 2010 and 2020. The long-term outlook for truckers generally appears positive, and fuel prices have decreased slightly in recent weeks. However, the government also predicts that more businesses may cut costs by using trains to transport goods in the years to come.
The Department of Transportation reports that it costs far less per mile to move cargo on freight trains or container ships. Trucks will be put at an even greater disadvantage if oil stays above $100 per barrel for several years. However, trucks can easily move cargo short distances and they do not require stations or ports.