Costly Miles: Running with Empties
As you know, fuel surcharges (FSCs) are used by carriers to compensate for variations in diesel prices for paid mileage. But deadhead, out-of-route miles, and idle time are not covered by FSCs. As the cost of fuel rises, so does the cost of running out of gas. Increased fuel costs alone might drive up the incremental cost of empty miles by $2,000 to $3,000 per tractor in 2022. Crude futures have dropped to $108 per barrel from a high of over $130 per barrel in early March.
Soaring fuel prices have thrown a wrench into what was already shaping up to be a year of declining TL fundamentals. The current spike in fuel prices coincides with a decline in spot rates, which include fuel surcharges. Morgan Stanley predicts a 10% drop in spot rates in the next six months and a 17% drop in a year.
In today’s economy, where everything costs more, thanks to inflation, an increase in the cost of empty miles is just another challenge to overcome. Due to greater fuel purchasing power and superior mileage economics, larger fleets have some protection from these costs, while smaller businesses pay at the pump, taking advantage of favored rewards and incentives programs. But it goes much deeper than a discount on donuts or having mommy or daddy’s credit card on hand to fill the tank. To truly maximize your offers and stretch every mile out of your tank, you need to be smart, savvy, and use strategic planning around your trips.
Our goal at Bestway is to provide comprehensive solutions to common logistics issues and fuel rates are a consistent pain point that many of us lost sight of in the last decade as prices fell and any spikes were easily identifiable over the horizon. Now there seems to be no rhyme or reason to the fuel swings except for hedged bets and market fears instead of factors. Bestway is encouraging our clients to plan ahead for their trucking and transportation needs to avoid dead time, delays, or one-way trips that can hit the budget hard. We’re working to make sure we maximize the routes we use to avoid unnecessary delays or problems and we have solutions we can suggest if you need an over-the-road plan to keep your cargo moving. Contact your Bestway representative and let’s see how we can help.