Costs Fall for Truckers Amid Slump in Fuel Prices and Slow Freight Demand

September 27, 2016 by Tiffany Hsu, @tiffkhsu

Operational costs for truckers fell last year amid sinking fuel prices and economic softness that continued into 2016, according to a new analysis.

The American Transportation Research Institute said Monday that the average marginal cost per mile for carriers was $1.59 in 2015, down 6.5 percent from the $1.70 recorded for 2014.

And for the first time since it began collecting financial data from North American carriers in 2008, the institute said driver wages now represent a higher percentage (31 percent) of overall costs than fuel (25 percent).

The group expects costs to swing back up this year as the fuel glut shrinks and prices recover. Trucker pay and benefits will likely increase as a severe driver shortage is exacerbated by an uptick in freight demand and an aging workforce.

But trucking industry observers are adopting a wait-and-see approach.

“There are all sorts of possibilities for a rapid decline in economic activity, but the safe forecast for now is that it’s going to look a lot like it does today,” said Ken Boyer, a transportation expert and professor of economics at Michigan State University. “There’s not much in the public policy that suggests a change is imminent.”

average marginal truck costs per hour graph

(Source: American Transportation Research Institute)

Below are some additional findings from the report, which looked at 2015 data and compared it to previous years.

  • The survey’s respondents collectively operate 107,028 tractors and trucks and 199,943 trailers and traveled more than 6.5 billion miles last year. More than two-thirds of respondents run small to mid-size fleets with fewer than 250 units. But the presence of extremely large carriers skews the metrics, so that the median fleet size is 76 units while the average size is 1,259 units. Some 35 percent of hauls were regional trips while 27 percent were local. One-third of respondents said they primarily hauled general freight, with just over one in 10 reporting that they trucked manufactured goods or refrigerated foods.
  • Specialized fleets had the highest total marginal costs of $1.79 per mile, followed by less-than-truckload fleets with $1.60 a mile and then truckload fleets with $1.50 a mile. Pay for drivers followed the same pattern. Private fleet drivers, many of whom are hourly and unionized workers, were paid roughly 60 percent more than for-hire truckers.
  • Larger fleets tend to have lower fuel costs per mile because of their buying power and sophisticated price-hedging strategies. They also enjoyed lower repair and maintenance costs — in part because lower freight demand allowed them to avoid deploying all of their trucks. “Some of the railroads are going after trucker freight — in particular, the eastern railroads,” Boyer noted. “But I don’t think they’ve made a big dent yet.” Truck fleets with more than 1,000 units spent 12.9 cents a mile fixing their vehicles, compared with 19.1 cents a mile for carriers with five to 25 units.
  • The total cost per hour, based on an average speed of 39.98 miles per hour, fell by $4.39 to $64.70. This is the third-lowest reading since 2008 and includes the cost of labor.
  • Driver wages per hour surged $1.49 to $19.95  —  a new high. Researchers suspect the increase is related to the driver shortage but is also an effort to regain productivity lost because of regulations and traffic congestion. Nearly two-thirds of survey respondents said they offered additional bonuses to drivers, handing out an average of $1,970 per driver annually as they sought to retain and recruit workers. And more carriers began using team drivers — nearly three in 10 last year compared with the same period in 2014 — and also began paying those drivers more. “Motors have been getting more efficient over the years, but you still need one driver per truck,” Boyer said. “This is a competitive market, and companies will pay what they need to attract drivers.”
  • Behind driver wages and fuel costs, equipment lease or purchase payments represent the largest percentage of costs (14 percent), followed by repair and maintenance (10 percent) and then insurance premiums, driver benefits, tires, permits and licenses and tolls. Insurance premiums are smaller for larger carriers but have steadily increased across the board, rising 2.1 cents a mile to 9.1 cents last year.
  • Carriers focused on the Midwest experienced costs of $1.489 a mile on average, compared with $2.331 in the Northeast.
  • Some 11 percent of fleets use at least some alternative fuel vehicles, up three percentage points from 2014 but still representing less than half a percent of all trucks. Alternative fuel types included compressed or liquefied natural gas, electricity, propane and hybrid.
  • Of the more than 85 percent of respondents who said they use speed limiters on their trucks, the vast majority employ the technology on each of their vehicles. The most common maximum speed setting was 65

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