Trucking association cries foul on diesel price jumps (Updated)
by June 23, 2009 9:44 am 67 views
The American Trucking Association announced today (June 22) that it has asked Congress to investigate the recent rise in diesel prices and to “increase the transparency of futures markets.”
The Fort Smith region is home to several trucking companies, including Fort Smith-based ABF Freight System and Van Buren-based USA Truck. ABF spent $50.52 million on fuel and other supplies in the first quarter of 2009, down 38.2% from the $81.85 million in the first quarter of 2008. Lower diesel prices and a 17% reduction in freight hauled in the first quarter of 2009 pushed ABF’s diesel bill lower.
The ATA said the market forces don’t justify the average 56 cent rise in the price of diesel fuel since February. It reports that U.S. oil inventories are near a 19-year high and oil demand is down 6% from this time last year.
“It seems that more is at play than just the fundamentals of supply and demand,” ATA President and CEO Bill Graves said in a statement.
However, diesel prices closed Monday (June 22) at $2.616, up 4.4% from a week ago but less than $2.03 from this time one year ago, according to the federal Energy Information Administration.
Updated info: “While ABF has not had discussions with the ATA on this issue, ABF typically supports any reasonable measures that are aimed at mitigating artificial spikes in fuel prices,” said Danny Loe, spokesman for ABF.
According to the ATA, the trucking industry spent a record $150.9 billion purchasing diesel fuel last year, and diesel fuel is typically the second-highest expense for a trucking fleet, accounting for up to 25% of total operating expenses.
“With relatively low freight volumes as a result of the global recession, the industry cannot afford a dramatic price spike in diesel fuel like the one in 2008,” ATA noted in the statement.
The ATA suggests an increase in commodity speculation is driving the price higher. The speculation, noted the ATA, likely results from investors seeking a place to hedge against inflation they see soon to result from the “U.S. and other governments’ massive economic stimulus packages.”
Speculation is a necessary and valuable tool and is often used by trucking companies to hedge their fuel purchases, but excessive speculation is harmful to the economy, according to the ATA.