Fueling the Fire: Why Diesel Is The Hidden Cost You Never Considered
Let’s say a trucking company charges its client a fixed amount to transport a load from Syracuse to New Jersey. The load is delivered on time and the client is pleased. The next time around, the trucking company charges more for the exact same job. The client is justifiably puzzled. Same load, same destination. Why the increase in price?
The fluctuating price of diesel fuel could well be the culprit. Tractor trailers and big rigs have no choice but to use diesel fuel: it delivers superior fuel economy, torque advantage for pulling heavy loads up steep grades, and long-term maintenance and durability.
According to the U. S. Energy Information Administration (EIA) average gas prices for May were $3.68 per gallon while average diesel rates were $3.96 with East Coast rates rising as high as $4.05 per gallon.
Why is Diesel More Expensive?
There are many reasons diesel users are paying more at the pump to reap the benefits of this fuel:
- Higher Taxes. The federal tax on diesel fuel is six cents higher than gasoline per gallon.
- ULSD Fee. An approximate 10 cents per gallon is tacked on for Ultra Low Sulfur Diesel (ULSD) that was mandated by the government for all vehicles dated 2007 and later.
- Production Favors Gasoline. Most U.S. cars run on gasoline, meaning more refineries are geared towards producing it.
- Demand For Diesel Is High. Buses, trucks, trains, and farm equipment all use diesel, and the demand is increasing. U.S. refineries are unable to supply the current demand, affecting prices. International diesel fuel imports also come at a premium.
- Time of Year. During late summer, more diesel fuel is needed for farm machinery for harvesting and transporting crops. In winter, when heating oil is needed, diesel prices rise faster than gasoline. While these fuels are slightly different from the diesel used in trucks, the transportation industry still feels the impact.
What Haulers Can Do To Stay In Control of Rates
While the price of diesel fuel seems destined to remain high, freight companies can still work to stabilize their prices by pursuing efficiency elsewhere. At Wadham’s, we implement the following:
- Computer technology to monitor engine idling times and fuel consumption in the cab of trucks
- Consistent vehicle maintenance to maintain fuel efficiency.
- Proactive mechanical upgrades to improve fuel efficiency.
- Employee education about the connection between fuel efficiency and customer service.
Freight Clients – Know What Prices To Watch
Meanwhile, freight clients can learn to handle the highs and lows of distribution costs more easily once they internalize this undeniably important aspect of the business. While most drivers keep a regular eye on gasoline prices, not as many track the price of diesel. The cost of diesel fluctuates just as much, and sometimes more substantially than gasoline. These dynamics must be factored into a trucking company’s costs.