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Diesel cost is heavy load for truck drivers
Rising prices shrink thin profit margins further
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At over $4 a gallon for diesel, truck drivers and other merchants are having a tough time staying in business.
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Eric Parsons / Star staff Truck driver Bud Smith enjoys the early morning scenery as he hauls rocks from a quarry near Lake Cachuma along Highway 154 into Santa Barbara. Skyrocketing fuel prices have made it difficult for owner-operators like Smith to make a living. At top, the cost of nearly 114 gallons of diesel was just shy of $453 at Macvalley Oil Co. in Oxnard on Tuesday.
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Jason Redmond / Star staff Angel Solis, a welder for produce grower and shipper Bud of California, stands atop his truck to fill his generator with diesel fuel at Macvalley Oil Co. in Oxnard.
After 32 years as an independent trucker, Bud Smith of Ventura would like to move on.
If only he could.
"I'm 60. What else am I going to do?" he said. "It's hard to get a normal job, so you go to work and hope it gets better."
Bill Bartzack, 58, a fellow truck owner-operator from Ventura, feels the same way. "Who wants to hire an old man?" he asked.
They are among many independent truckers who feel stuck struggling to pay their bills after shelling out more and more of their earnings for diesel fuel.
Ventura County's average price for diesel hit a record $4.11 a gallon Friday, up about $1 from a year ago and about 50 cents ahead of regular unleaded today, according to the Automobile Club of Southern California.
Diesel is the lifeblood for tractor-trailer rigs, which average 5 or 6 miles per gallon. A fill-up can be as expensive as a $700 20-inch LCD TV.
Drivers are watching nervously, wondering how much higher pump prices can climb.
Diesel could retreat to less than $4 if investment speculators back off oil in the next few weeks, said Jack Kyser, chief economist of the Los Angeles County Economic Development Corp.
Diesel's spike is partly seasonal; it tends to be more expensive during the winter months because it's similar to heating oil, industry analysts say.
Diesel and heating oil are essentially the same product, except that in diesel fuel, more sulfur has been removed, said Doug MacIntyre, senior oil market analyst for the Energy Information Administration.
The high prices have been fueled by global demand, especially in Europe to power diesel vehicles and in China to run backup generators for businesses during electrical outages, experts say.
Average motorists might be unaware of the diesel crunch, but they soon might realize it when shopping at the grocery store and other places. Rising costs to operate diesel-powered farm equipment and tractor-trailers, which, according to the American Trucking Associations, transport an estimated 70 percent of all goods, are being passed on to consumers.
Look at how much prices have increased at the supermarket, said Craig Underwood, owner of Underwood Farms in Moorpark and Somis.
"(We) don't have a choice," Underwood said of raising food prices. "We can't continue to absorb costs or obviously we'll be out of business."
Independents more affected
Unlike truckers who work for companies that tack on fuel surcharges to clients, independent truckers have little leverage to pass on their extra costs. They typically operate as a one-person business that has to negotiate fees with customers.
Smith said he feels sick every time he sees prices go up a couple cents. "You're out here working very hard; nobody wants to give you a raise," he said. "There's so many people going out of business."
Drivers in the past have described trucking as a good job, which makes up for predawn hours and sometimes spending days on the road away from family.
Wages vary widely. In May 2006, the U.S. Department of Labor estimated truck drivers' pay ranged from $10.80 an hour to $25.39 an hour.
Smith's bottom line has been hurt by the jump in diesel fuel prices. It used to burn 10 percent of his take-home, but now consumes 35 percent — and the total is climbing. The increased cost has shaved roughly $275 off $800 in his daily earnings.
That can add up over a year.
In 2006, Bartzack spent $63,000 on fuel, and though he hasn't added up the figures, he expects the total to be much higher for 2007. Since diesel has risen to more than $3 a gallon, filling up can run him $1,500 more a month.
Many other rising costs
On top of that, many independent drivers have to pay about 5 percent of their earnings to a broker for finding them work, plus 25 percent more for renting a trailer. And thousands of dollars are spent annually on maintenance and insurance for a truck rig. Soaring energy costs are pushing everything higher, from oil changes to having tires recapped.
The only way for the trucking industry to survive is to add a fuel surcharge, said Julie Sauls, vice president of external affairs for the California Trucking Association.
The association is researching ideas that could help companies with fuel purchasing, Sauls said.
"We understand that it's really going to impact the way people do business," she said. "It is very painful to see the rise in prices. It's painful for every individual."
Rising fuel costs are destroying the bottom line for drivers, Bartzack said.
"In our industry, we don't have that word — profit," he said. "In 12 years, I've never had profit."
But truckers say they can't complain because there are people "lined up to take your spot" willing to work for less.
Construction truckers see the surge in diesel as the latest blow, since they already have been slammed by the housing downturn, which has halted or slowed new development.
In Ventura County, there were 1,849 permits issued for new housing units last year, compared with 2,461 in 2006 and 4,516 in 2005, Kyser said. He projects it will take another 12 months for the housing market to recover. That means another year of bad news for construction truckers.
Dennis Biggs of Ventura can't take another bad year. New-home construction accounted for about 70 percent of his work. The independent trucker's monthly gross income has tumbled from $12,500 to $5,000. Last week, he took the CB radio and lucky penny out of his cab and put his truck up for sale.
"It's killing us," said Biggs, who says most of the truck drivers he knows are struggling. "It's killing me ... I don't have any money left after paying all my bills. I don't even have money to purchase fuel."
Biggs thinks he and his wife will lose their home unless he can land a good job in the next few weeks.
"We're all being punched in the mouth right now. No new houses means no work."
He and other truckers who haul construction material say they recently have been working from a handful to 15 days per month.
Tapping their reserves
"You use what money you have saved to get through months of working five or 10 days," Smith said. "I have nothing to put in my retirement at this point. There's nothing left. You're just hoping you can pay your bills. You have to work until you die."
Many truckers seem to be facing the same bleak reality. They're already stretched, and don't know what they'll do if diesel goes much higher.
Bartzack was planning to retire at 62. Now he's figuring he'll work until he's 68 or 70. To survive, he and his wife have curbed their spending and refinanced their home, from a 15-year to 30-year mortgage that reduced their monthly payment $1,500.
Bartzack and Smith actually are in a more comfortable spot than many drivers because they don't have truck payments. In December, Bartzack paid his last installment of $2,000.
"Hopefully, I'll be able to survive," Bartzack said, "but for how long, I don't know."
Posted by dcsfancy on March 16, 2008 at 6:08 a.m. (Suggest removal)
Why is diesel costing so much more than gas. It used to cost less than gas. Isn't it a byproduct of gas?
Posted by CAtruckdriver on March 16, 2008 at 9:55 a.m. (Suggest removal)
Welcome to the world of being an Independant truck owner. Ever since the housing market has declined and fuel prices have gone way up owning your own truck isnt a joy anymore. Luckily like a few others, I own my truck (paid off) so it's a 'little', not much easier to pay bills but work is drying up and if work doesnt pick up soon I'll be looking for a job just to feed my family. Yes DCSFANCY, diesel fuel is a by-product of gasoline, it's amazing how much the big oil companies charge for it when it's basically left overs of gas. Bud Smith is right, we can only charge the customer so much because there's a line of people who see guys making $$ and everyone in that line is trying to take it away via working for less $$ then we will. Luckily I'm in a different type of hauling where it takes big $$ and big $$ insurance to haul what I haul and it's too expensive for the avg. guy to afford just the cargo insurance let alone having the heavier duty truck to haul what I haul. Fuel surcharges only cover so much of the increase in fuel costs over the last few years, pretty soon trucking costs in EVERYTHING will have to go up so much that everything anyone buys (gas,clothes,groceries,lumber,new cars,etc.) will be more expensive to the end customer. All the tax payers in the county need to call, email or write their local representatives and explain that we're all going broke in living/working due to gas/fuel prices and something needs to be done about it. People in business are entitled to make $$, I agree but when Exxon/Mobil makes a 40.8 BILLION profit in the 4th quarter of last year I'm pretty sure their making enough $$. Truckers are out here working long days, paying many fees and insurance just to be legal to run down the road and the gas companies are clearly overcharging the general public right along with us truck owners because the demand is there for the gas/fuel. People need to speak up to the goverment and let them know it's time to end this over charging of gas/fuel!! Remember people, we elected the govt. officials into office, if they cant do whats right for the people they serve we can elect them right out of office too!!!
Folks we all need to speak up and take a stand agaisnt big oil companies and the costs or the cost of living and buying is going to soar thru the roof due to rising oil/gas/diesel fuel costs. Trucking is the vital backbone of this country and not just truckers, but EVERYONE needs to help keep trucking industry affordable and in place!! REMEMBER, if you eat it, wear it, drive it, live in it, or drive on it, a truck brought it. You ALL need the trucking industry!
Posted by uknow1 on March 16, 2008 at 11:28 a.m. (Suggest removal)
Yes, but all of the people invested in the oil companies stocks are happy that gasoline is so expensive; more dividends for them. We have a crooked, oil man in the White House and if you don't see the connection you're not paying attention. Oil companies should be nationalized. Most of them are not even U.S. compnanies anymore and they are bleeding us dry. How much was diesel when Bush took office? Well under $1 a gallon.
Posted by CAtruckdriver on March 16, 2008 at 1:33 p.m. (Suggest removal)
Heck yeah I wish I had stock in an oil company looking back at how much they've went up!! I dont even have a hard time saying that, especially when I own a truck that uses overpriced fuel. Maybe if the people of this country will speak up and not take it, maybe something will be done about it and we wont just sit back and take gouging like that. Until someone who isnt hand fed by BIG business gets into office, nothing will ever be done about it unless the citizens of the U.S. stand up and let the president know that him favoring the oil companies profits and so on happen, nothing will change. Most of the people in construction know fuel prices are high, yet still complain when the trucking bill comes in the mail. I've had people ask me why I charge "so much" for what I deliver.. "I dont" I tell them. I'm one of the last to NOT implement a fuel surcharge (5-25%) and the common response is "oh really, I didnt know?". The price of diesel fuel is affecting EVERYONE but most just dont know about it. Anymore, in trucking, all you can sell to a customer is your good service, not a shiny truck, low rates or even favors anymore. It's so darn expensive to run a truck it's amazing. I own 1 truck and spent $42,000 in fuel last year, the year before was $36,000 and I was busier the previous year and ran the truck more days. Amazing how a few cents here and there can add up. I'm telling it how it is, if the public dont speak up and do soemthing about the high prices of gas/fuel/oil more and more people will be losing their homes, losing their retirements, and never being able to even retire if they dont have something in place already. It's a sad reality that the elected oficials of this country are bleeeding the ecomony dry for their gain.
A VERY disturbing thing I heard with the housing market thru a real estate attorney last month is in the sub prime loan scandals that a few of the big oil companies have opened mortage companies and are buying alot of the sub prime loans that will or already have reset and are heading into forclosure. Once they default, the new mortgage companies write it off as a loss on their taxes at the end of the year. Basically they buy these loans, let them default and forclose and that mortgage co. will go bankrupt within a couple years if not sooner. The big oil company that owns that mortgage company who now has BILLIONS in loss write that loss off agaisnt their gas/diesel/oil profits and ends up paying less in taxes over all. How sick is that? They nail us on gas/fuel at the pump and then our homes are used as their tax write offs?? Check into it people, the big businesses are screwing us all the way around if it's true. I even emailed my 2 local representatives and straight out asked IF it's true and no comment was sent back. Welcome to politics.
Posted by lrgvanman on March 16, 2008 at 1:36 p.m. (Suggest removal)
Same goes for propane. The lame excuses for price increase go on and on. I'll just bet that what ever is left as a waste product even earned a ridiculous cost! The oil companies, foreign and domestic need to get real and realize that they are only eroding life as WE all know it. Even greed results in a cost. They may be wealthy but got there by ripping us all off!
Posted by cassandra on March 16, 2008 at 2:07 p.m. (Suggest removal)
There are some long term supply problems with petroleum, not just price gauging and consumer exploitation from Big Oil. Aggregate supply has remained steady for about 3 or 4 years despite ballooning demand. Big oil fields peaked in Mexico, Saudi Arabia and elsewhere and most other sources are long past their prime. Discovery of new big finds is sparse and discouraging and many are located in areas of the world where the people don't like us much. With good reason.
Not just the trucking industry but our entire industrial civilization is closely tied to oil, and adequate alternatives are not on line, despite a lot of really smart people working on this for the last few decades. Google "peak oil" and check it out.
Looks like we are in big trouble. Maybe these oil corps are just taking the money and running while they can.
People who have built their lives around learning their job and doing it well deserve better than these truckers can expect. I get very angry at conservatives who blame individuals who come up against hard times that they hadn't the information to predict nor the power to control. Some people are in trouble because they are feckless, but most folks are like these truckers, making the best decisions within their power day to day and they get screwed anyway.
Posted by aztowbum on March 16, 2008 at 6:54 p.m. (Suggest removal)
Another closely related industry is also being affected by rising Fuel costs: Towing...Those firms that have various Auto Club service contracts are being crunched due to contactual rates that have no fuel increase provisions. Law enforcement contracts are also usually a set rate with the only way for operators to get relief is to go back and re-negotiate those contracts.
And before one cries about their vehicle being impounded and the "Bail" was $xxx be aware that anywhere from 30% or more of the vehicles impounded stored are never redeemed and the Operator must file papers to obtain the legal ownership so they can dispose of those cars.
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