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 Editorials | Opinions | March 2008 
Why Your Groceries Are Costing More
 Alan Burkhart - PVNN
 |  | Fuel costs and the declining dollar will render the American middle class extinct if something doesn't change soon. And the only thing that'll help is a decrease in fuel prices. |  | | | |
Everywhere you look, people are wringing their hands over the economy. I'm not immune to this. We appear to be teetering on the edge of a long fall, and I'm not looking forward to it.
The media has a habit of quoting numbers and then citing the same tired old sources as the main cause of our current economic decline. Corporate greed, the declining dollar, weather-related issues, or "just blame Bush" get tossed out on the airwaves every day. Allow me to give you something different to worry over: The cost of commercial transportation.
Having been in the trucking industry for three decades, this is something I'm qualified to talk about.
A few years ago trucking companies large and small could make money hauling freight for about $1.20 per mile. This includes food items, paper goods, structural steel, agricultural products and pretty much whatever else you can think of. Fuel, of course, was a good bit cheaper during this period, averaging around two dollars per gallon. Modern commercial trucks generally get about six miles per gallon, which is a vast improvement over the 3.5 mpg back in the 70's when I started driving a truck. Six miles per gallon is an average, with some getting more and others getting less. The cost per mile for fuel at 6 mpg / $2 a gallon was thirty-three cents per mile.
As of this writing, the national retail average price for a gallon of commercial diesel is $3.77 USD. Connecticut is currently at $4 per gallon (that's not a misprint. That $4 per gallon), and Oregon is the cheapest at "only" $3.57 per gallon. The $3.77 average (AK and HI are not included) for 48 states translates to an average cost of sixty-three cents per mile - almost twice the cost as a few years ago.
Add to this amount the driver's salary - a minimum of about 35 cents per mile with most companies paying in the 40 - 45 cents per mile range and the cost per mile goes over a dollar. To that, add in the necessary per-mile computation for permits, insurance and truck / trailer registration. Registration for a commercial truck-tractor, by the way, costs $1000 to $1800 depending on where it's registered and a handful of other considerations.
But we're not done yet. Now consider that freight revenue also has to pay the wages of mechanics, dispatchers and administrative personnel. Then allow for keeping the lights on and the water flowing, property taxes, facility maintenance and whatever other requirements an individual company may have.
And did I mention tires? Depending on the type of tire (trailer, drive tire or steer tire,) and the part of the country you're in when you buy them, truck tires cost anywhere from $280 to nearly $400 each. That translates to about $5000 to put new tires on an 18-wheeler, and truckers average about 120,000 miles per year. Tires don't last long.
I work for a small company with 30 trucks. We don't leave the office these days for less than $1.75 per mile. If we work for less, we lose money. It's just that simple. In the practical sense, we need about $2 per mile to make it worthwhile.
Look at it another way: at $1.20 per mile, the ton rate for a 44,000 pound load of freight is about five cents per mile. At $1.75 per mile, the ton rate increases to eight cents per mile.
That may not sound like much, but consider the following tidbit from the US Government's Bureau of Transportation Statistics:
According to the composite estimates, trucking as a single mode was the most frequently used mode, accounting for an estimated 70 percent of the total value, 60 percent of the weight, and 34 percent of the ton-miles. In 2002, the trucking industry, both for-hire and private own-use, transported over $9 trillion worth of shipments, weighing over 11 billion tons and generating about 1.5 trillion ton-miles. Measured by ton-miles, trucking was followed by rail at 31 percent, pipeline at 15, and water with 11 percent.
Now, go ahead and tell me that three cents per mile doesn't matter when you hit the check-out line at Kroger. Also consider that nearly all freight is transported by truck. That's how it gets to and from the rail yards, farms, airports and marine docks. If you've got it, chances are a truck hauled it at some point. Because of this, the cost of trucking affects everyone.
Truck and engine manufacturers and trucking companies are working to find ways to reduce fuel cost, but it's a slow process. The EPA and various politically-motivated environmental groups don't help any. Newer blends of fuel cost more money and have decreased lubricity, leading to increased maintenance costs. This of course has an effect on a trucking company's bottom line and thus affects consumer prices. Newer technology also adds to the price of a new truck. Just try to buy a new over-the-road truck for under $90,000. Then try outfitting a fleet.
Fuel prices have ballooned to a point that filling your car's gas tank is a major investment. Last week it cost me $40 to buy 13 gallons here in Mississippi. This week it'll cost more. But consider the cost of buying 100 to 120 gallons of fuel every day. Where I work, if half the 30-truck fleet fuels today at an average of 110 gallons per fill, and $3.779 per gallon... that's over six thousand dollars a day for 15 trucks. Meanwhile, oil companies are raking in record profits and something tells me they're not terribly concerned over what it costs me to fill the tank of my trusty old Chrysler.
Fuel costs and the declining dollar will render the American middle class extinct if something doesn't change soon. And the only thing that'll help is a decrease in fuel prices.
As operating costs increase, unemployment (which is on the upswing now) will become a huge factor. Employers will cut jobs to stay afloat. That doesn't make them greedy; it's just a fact of life. You could also reach a point at which the cost of driving to work renders your job unprofitable. And wouldn't that be a slap in the face?
By the way... Consider nail-biting as a viable option to hand-wringing. No calluses and your nails stay neat. Just a thought.
Related Reading:
Bureau of Transportation Statistics
Daily Diesel Prices (state by state averages dynamically updated)
Flying J Diesel Fuel Price Chart
Job Losses: Worst in 5 Years
Alan Burkhart is a cross-country trucker and occasional columnist from Mississippi. You can view all of Alans work at his blogs: http://alanburkhart.blogspot.com and http://roadimage.blogspot.com You can contact Alan at: alan(at)alanburkhart.com. |
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