It's Time for Legislation on Fuel
By Henry E. Seaton

April 2000
Reprinted from

In December's Sound Law, I recommended that all small carriers impose a fuel surcharge in their existing rates to compensate for the spiking cost of fuel. Responsible shippers should expect to pay a fuel surcharge.

Unfortunately, many motor carriers, both large and small, haven't been successful in obtaining voluntary concessions from the shipping public to recoup high fuel costs. Many shippers have tried to force carriers to accept their fuel adjustments, which are meager in view of the economic realities. By early February, truckers in the United States and Canada, particularly owner-operators, began thinking about strikes and shutdowns.

Thus far, no one else - shippers, the Clinton administration or Congress - seem overly concerned about the fuel crisis, although there has been legislation introduced in Congress to waive federal diesel taxes for a year. On top of this indifference, hours-of-service revisions - which will further cut productivity and increase costs - seem to be moving quickly through a White House review.

As of early March, the Department of Energy's national diesel price is about 50 cents per gallon higher than at the same time last year. Figuring in deadhead miles, this surge has increased a carrier's costs by an average of 8 to 10 cents per mile. Fuel surcharges offered by shippers in the range of 2 cents to 3 cents per mile don't begin to compensate carriers. If Federal Reserve Chairman Alan Greenspan thinks inflation is in check, it is because the motor carrier industry is taking the high cost of fuel on the chin.

The American Trucking Associations has sent letters to President Clinton and others formally requesting action, and owner-operators became politically active, taking their cause right to the steps of the Capitol. OPEC may eventually relax the oil supply, but that won't make up for the money small carriers have lost in the past several months.

It is time to address this issue. An international cartel beyond the trucking industry's control - not the economic principles of supply and demand - determines the price of oil. And domestic producers and oil companies have as much interest in high fuel prices as OPEC does.

Fuel is a pass-through cost, over which the trucking industry has no control. Carriers should be free to negotiate their base price predicated upon their overhead, productivity and empty miles. Carriers should not be financially ruined because of unrecompensed fuel costs beyond their control.

Whether they are cost of living adjustments, discounted Federal Reserve interest rates or Consumer Price Index factors in lease agreements, other industries benefit from generally accepted variable cost factors. So why not in the trucking industry?

Prior to deregulation, in a fuel crisis, the Interstate Commerce Commission imposed a mandatory fuel surcharge and required that revenue from the charge to the company or owner-operator that bore the fuel cost. We need a similar uniform national fuel peg and a mechanism for adjusting rates based upon the cost of fuel. If carriers could compete on price based on the same fuel peg, competition would be enhanced.

By statute, Congress has declared the purpose of the National Transportation Policy with respect to motor carriers will include:
* Encouraging fair competition at a reasonable rate
* Promoting efficiency through fair and expeditious decisions
* Allowing for the productive use of equipment and energy resources
* Enabling efficient and well managed carriers to earn adequate profits
* Maintaining a sound, safe and competitive privately-owned motor carrier system
* Stabilizing the impact of fuel prices on carriers would advance all these goals.

By establishing and publishing a standard truckload fuel surcharge applicable to government agencies, Congress could establish the type of standard mechanism the industry desperately needs.

It is time for carriers to compete on the same level and receive fair compensation when variable fuel prices begin to spike upward. It's also time for carriers to stand their ground when shippers refuse to accept higher prices from carriers due to higher fuel costs.
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