Shippers, Truckers Deal With Soaring Fuel and Labor Costs

May 22, 2018 by Clarissa Hawes

The cost of labor and fuel — the two largest trucking industry expenses — are rising at their fastest rate in years, adding pressure to manufacturers and retailers to raise the price of goods.

Drivers are leaving the industry to take jobs in other labor-starved industries that allow them more time with their families. Fewer younger workers are entering the industry, leaving trucking with an aging workforce that is retiring rapidly. Motor carriers are trying to address the trends by increasing pay.

“We have equipment sitting right now because we can’t find drivers,” said Mike Card, president of Combined Transport of Central Point, Ore., which operates 500 trucks.

Card said he isn’t losing drivers to other motor carriers, but to local businesses who can offer drivers something he can’t — guaranteed home time every night.

“We see this happen when the economy is strong — we lose drivers because of new construction or other local jobs,” Card said.

Last year, he implemented two pay increases to retain drivers. So far in 2018, he has increased driver wages twice to remain competitive in a market that he said is “desperate” for drivers.

“Right now, I can raise my prices because the economy is strong,” Card said.

About 36 percent of Card’s operating costs are driver-related expenses, including wages, training, payroll processing, workers’ compensation coverage and health insurance.

Driver compensation accounted for 33 percent of motor carrier expenses, according to 2016 data collected by the American Transportation Research Institute, or ATRI.

Driver wages and benefits are at a five-year high as fleets respond to the ongoing driver shortage, said Rebecca Brewster, president and chief operating officer of ATRI.

Fuel, which accounted for about 21 percent of carrier expenses as of 2016 according to ATRI, also is rising rapidly.

The average price of diesel reached $3.28 per gallon Monday, 29 percent from a year ago and its highest level in 41 months, according to the latest U.S. Energy Information Administration fuel pricing report.

Diesel prices could climb as high as $3.50 by the end of 2018, said Noel Perry, an industry analyst and principal with Transport Futures.

ATRI is surveying trucking companies and expects to see wages and fuel account for an even larger percentage of expenses when the data are in, Brewster said.

Profit margins in the industry are already small, Brewster said, “so, when you see these increased costs you are going to start to see those bear out in transportation costs for the supply chain.”

Trucking companies are already taking action to protect their earnings.

Old Dominion Freight Line on Monday announced a 4.9 percent general rate increase to cover rising operating costs, driver pay in particular.

The rate increase will partially offset “the rising costs of new equipment, real estate, technology investments and competitive employee wage and benefit packages,” said Todd Polen, vice president of pricing services of Old Dominion, a less-than-truckload carrier headquartered in Thomasville, N.C.

XPO Logistics also recently implemented a 5.9 percent rate increase.

These higher labor and fuel costs are rippling through the economy, creating higher expenses for manufacturers and retailers that will eventually be passed on to consumers.

“We are seeing a pickup in inflation because the economy is doing relatively well,” Beth Ann Bovino, senior economist at Standard & Poor’s Global Ratings, told

“We are kind of in that little dance where previously consumers had control in terms of holding back pricing and businesses couldn’t pass it through,” she said. “However, we are at the point where you might start seeing a change because consumers seem to be able to absorb higher prices.”

“We see pressure from transportation costs and [will] work through it to mitigate what we can,” Stephen Holmes, senior director of corporate communications of The Home Depot, told “That might be adjusting costs in some other part of the business.”

In recent calls with investors, executives at General Mills, Tyson Foods and John Deere said they were trying to raise prices to cover higher freight expenses.

Shippers don’t have much flexibility in avoiding the higher rates charged by the trucking firms. There’s a shortage of trucks available to haul freight.

There are about 6.6 loads for every available truck trailer, according to DAT Solutions, which tracks freight and rates. A year ago, there were 3.5 loads per every van. The imbalance gives motor carriers the ability to raise rates to cover rising expenses.

The surging freight demand caught some shippers flat-footed, said Josh Brogan, vice president of A.T. Kearney, a supply chain consulting firm in Atlanta.

“When the capacity crunch hit in the second half of 2017, most shippers really didn’t have a back-up plan,” Brogan told “They were used to having 200 carriers or more to choose from before the capacity crunch hit to only having around 50 available carriers.”

Besides paying higher freight rates, shippers are making adjustments to make them more attractive clients for motor carriers, Brogan said.

Reducing truckers’ wait times at docks and reducing the number of days it takes for a trucking company to be paid are two ways shippers are working to attract truckers, Brogan said. Some shippers take 120days to pay transportation costs, now some shippers are trying to pay within 30 days, he said.

Oil prices fluctuate and could back off from recent highs, but the strong economy is only going to create more freight demand, Bovino said.

“We are expecting housing starts to pick up. That means not only are truckers and shippers transporting construction-related materials to the sites, but if we are building more homes, that also means households are going to fill them with new stuff, so the demand for those items will also increase,” Bovino said.

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