Soaring Prices Leave Owner-Operators with Tough Choices.


Soaring prices across all avenues have left the trucking industry with plenty of decisions to make about cost-cutting. The trucking industry carries the weight of the country’s infrastructure and supply chain. It has traditionally consisted of large transportation companies, logistics businesses, and smaller owner-operators. Unfortunately, the industry is vulnerable to particular challenges, not the least of which is the rising fuel cost.

The Impact of High Prices

With soaring prices, including fuel costs, repair expenses, and the various types of truck insurance needed, these owner-operators may be struggling to make ends meet.

How Inflation Is Affecting the Trucking World

The trucking industry depends on diesel fuel to keep the trucks moving from the loading dock to the destination. Any time oil costs rise, diesel fuel costs rise as well. Additionally, the current inflation has pushed diesel prices to record highs. The higher diesel costs climb, the lower profits become for many trucking companies. These profits affect the owner-operators. Owner-operators are smaller companies that often don’t have the same profit margins or revenue volume as the larger trucking companies. Thus, they are more drastically affected when variables, like fuel costs, increase sharply.

Ideally, drivers would offset those increased fuel costs by being more selective about the loads they transport. It means they could opt for longer runs and higher-paying shipments. Unfortunately, supply chain issues and inflation have led to fewer available loads, smaller loads, and shorter runs. In some cases, drivers have to deadhead or run empty for nearly as many miles as the delivery run to pick up the load. These things prove costly, especially for owner-operators.

Direct Employment With a Carrier

For owner-operators, this is a difficult choice. Direct employment with a carrier means giving up their independent status, but it can save them significantly because the carrier they work for shoulders the fuel costs.  Most  carriers provide  the  truck insurance for their drivers, saving independent operators even more during these challenging times.

Negotiate Contracts That Include Fuel Surcharges

If you have established contracts with certain companies, you may be able to renegotiate those contracts to include a fuel surcharge for each load while diesel prices are so high. When negotiating new partnership contracts, have the surcharge as an automatic component. Some clients may want the option to revisit the surcharge when fuel prices come down.

Ride It Out

Larger trucking corporations, and even some owner-operators who are more financially secure, may decide to simply ride out this troubling period of soaring prices and moderate demand. Companies that have been in the industry for many years may have enough savings from more profitable times to withstand the strain for a while in hopes of improvement. Newer and smaller businesses may not. These companies may end up priced out of the market.

Leave the Industry

For businesses with little savings or no contingency plans, rising costs for diesel fuel, limited diesel supply in some areas, and the reduction of available loads may leave them with no choice but to leave the industry altogether.

Why This Perfect Storm Is Forcing Some Owner-Operators Out of the Industry

Owner-operators may be disproportionately affected by this economic downturn and trucking industry shift. Subsequently, these drivers often have fewer savings to fall back on and are paying their own expenses.

Unlike company drivers, who are often paid a flat rate for days spent down for repairs, owner-operators lose money while down for repairs. With supply chain issues affecting vehicle parts, diesel engine oil, and diesel fuel supplies, these drivers may be down for repairs or maintenance for much longer than they can afford. However, parts take months to arrive, with drivers unable to operate until they do.

Rising diesel fuel costs have already made the industry virtually unsustainable for smaller operators. When supply chain problems add to that challenge, it generates a perfect storm to ultimately force smaller owner-operators out of the trucking industry. It is often more cost-effective for these drivers to sell the truck and pursue other avenues instead of waiting for repairs and dealing with high fuel costs.

What This Means Going Forward

These challenges are changing the face of the trucking industry. The smaller shippers and owner-operator options are becoming scarce as the trucking industry shifts to a new dynamic of corporation-driven shipping with company drivers and fewer shipping options.

The current economic conditions and soaring prices are pushing the smaller operators out of the industry. Thus, it leaves the corporations that can sustain the financial burden in the short term. It isn’t likely that new shippers will enter the market for some time. However, the industry and the associated burdening costs must right themselves first. Larger companies can shoulder the costs, including diesel fuel,  repair and maintenance expenses, fleet safety, and insurance costs.. .

About Western Truck Insurance Services

Western Truck Insurance Services is a commercial truck insurance agency with roots dating back to 1954. We have evolved into a highly respected, professionally managed, truck and transportation insurance brokerage. The hallmark of our organization is our desire to provide unparalleled service. We go way beyond what you expect to receive from an insurance brokerage. Equipped with state of the art automation, Western Truck Insurance can provide you with lightning fast truck insurance quotes, customer service, Insurance certificates, and coverage changes. Contact us today at (800) 937-8785 to learn more!