Fuel Prices Give Willis Shaw Lesson in Going Green

Dealing with skyrocketing diesel prices during 2008 was a “wild ride” for Willis Shaw Express president Chris Kozak.

The privately-held Elm Springs trucking firm that specializes in refrigerated hauls across the continental United States also found opportunity amid the crisis.

The American Trucking Association estimated as many as 3,000 transportation companies went out of business because of unmanageable fuel costs.

“It was fast and furious,” Kozak said. “It did its number on the economy and started going down hill quickly.”

Fuel prices often increased faster than Willis Shaw could raise its surcharges on its shippers, meaning it was eating some of the cost it usually passes through. Prices hit their peak average in July at $4.76 per gallon and Kozak said at times WSE was charging 30 percent to 40 percent more in surcharges.

“It wasn’t just us, everybody was,” Kozak said. “Those poor shippers. It did translate to the grocery shelf and people saying, ‘come again?’ That was directly related to energy.”

The run-up to that record price happened nearly a year ago, when diesel went from an already backbreaking price of $4.14 to $4.72 in just four weeks of May.

Diesel prices didn’t drop below $4 until late in September when the financial crisis was in full bloom and the onset of a global recession depressed prices nearly as quickly as they’d been inflated.

From the beginning of October to the end of November, diesel fell from $3.87 per gallon to $2.66, a 31.2 percent decline. For the year, inflation ended at less than 1 percent after being at an annual pace of more than 6 percent as late as August.

“When it was going up so much, our surcharges weren’t current,” Kozak said. “On the way down, each week, we were ahead of the game. For us, it ended up being an acceptable budget number. It was a wild ride.”

The rapid decline “kept a lot of people in business,” Kozak said, and lower prices masked the drop in tonnage for carriers during the fourth quarter as GDP contracted by more than 6 percent.

“They were experiencing better numbers from fuel going down, but the volume was decreasing dramatically,” he said.

Looking back, Kozak said the spike in fuel costs was a wake-up call for conservation across every industry, not just transportation.

Willis Shaw dug down to find every cut possible.

They lowered the speeds for their rigs and don’t plan on raising them again, Kozak said. They found ways to reduce “out of route” miles that aren’t billed to shippers and “empty” miles between shipments.

WSE also consulted with its customers and increased temperatures in the trailers from minus-10 degrees to 0 to reduce fuel usage.

“That’s the good thing about today,” Kozak said. “Going green. Everyone has a responsibility to be proactive. When you go through a stretch like that, everyone is a little sharper.”

Kozak said he sees evidence of the paycheck-to-paycheck cycle in WSE’s business with some weeks full of activity and others just as slow.

“No one can predict what the consumer is going to do,” he said.

WSE’s food transport business is recession-resistant, not recession proof, he said, and loads of fast food value menu items are going faster than deliveries for formal restaurants.

And while retailers are pressuring suppliers to lower prices now that fuel and commodity prices have fallen so far, Kozak said hedging may be a factor in the resistance if suppliers locked into above-market prices.

“Some shippers, when they saw relief coming, they dove into it,” he said. “Fuel went down to $3, but then it dropped even farther.”