Fuel Prices Pump Up Cost of Development

As of June 14, on-highway average retail diesel prices had increased 20 percent, or a total of 27.9 cents to $1.711 from $1.432 per gallon a year ago, according to the U.S. Department of Energy’s Energy Information Administration. The most recent number is down from the reported cost of $1.761 per gallon on May 24.

It’s probably impossible to assign a value to the added cost of development in Northwest Arkansas due to increased fuel prices, primarily because steel and cement prices have also fluctuated. But trucking firms and general contractors alike say their prices are up and their clients are the ones ultimately paying the price.

Dennis Tune, co-owner of Tune Trucking Inc. of Fayetteville, operates about 100 trucks including 55 concrete trucks, 20 tractor-trailer rigs and about 20 dump trucks. The main focus of his business is concrete sales and service, he said, but Tune also hauls raw materials for dirt work and development.

Tune’s company implemented a 10 percent price increase in April. The increase was in part due to concrete cost, but also fuel, he said.

Tune is burning about $25,000 to $30,000 in diesel fuel per week, or about 14,000 to 17,000 gallons in his fleet, he said. Tune added trucks last year, but the cost was about 60 percent of what he’s paying now, he said.

Loads of concrete are up 7 to 10 percent, due mostly to the increased cost of commodity cement, he said.

Tune said he and his partner/brother, Michael Tune, have wrestled with the idea of implementing another across-the-board percentage increase, he said. But the idea didn’t seem fair because the increase is not just a spike.

“This is a substantial, sustained increase,” Tune said. “It’s affected about every aspect of my business.”

Parts and equipment Tune receives to operate his fleet are getting more expensive, too, because shippers charge more.

So he’s taken his cue from the national carriers. He has implemented a sliding-scale fuel surcharge based on the price per gallon. He said he’s basically copied one of their scales and plans to implement it by the end of June.

Patrick Tenney, vice president of Baldwin-Shell’s Rogers office, said the cost of construction is up across the board. Like Tune, he said steel and concrete prices have been up along with fuel.

The cost of getting materials onsite is up. Tenney said he’s seen a cost increase in subcontractors and materials, but couldn’t guess what percentage was added due to fuel costs versus the general rising cost of materials.

David Humphrey, director of investor relations for Arkansas Best Freight Corp. of Fort Smith, said the less-than-truckload carrier adjusts its fuel surcharges based on the Energy Department’s Monday published prices. The cost increase to customers comes on Wednesday.

He said the cost eventually gets passed on to the end-user. “It’s never good when fuel prices are this high,” Humphrey said.

On the flip side, he said, if diesel should happen to dip below $1.10 a gallon, ABF actually refunds money to its customers.