Time for Legislation on Fuel
By Henry E. Seaton
Reprinted from etrucker.com
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
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
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
* Stabilizing the impact of fuel prices on carriers would advance all
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.