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Truckers Face Double Whammy of High Fuel Prices, Low Freight Rates

There are days that Rick Hackett doesn’t bother going to work.

 

Hackett, 53, is an independent truck driver based in New Jersey. He said that high diesel prices and low contract rates offered by brokers — the middlemen who match shippers with drivers — have made his business sometimes unprofitable since around May.

 

“It’s not just diesel prices. Truck maintenance, oil changes, they’re costing more with inflation, too,” said Hackett, who has been a driver for 16 years with a six-year stint as a social worker in between. “I’m holding out.”

 

There are around 2 million truck drivers in the U.S. who earn an average of $48,310 as of 2021, Bureau of Labor Statistics figures showed. These are the Americans facing the diesel squeeze. 

 

While the average price of gas in the U.S. has fallen significantly from more than $5 per gallon in June, diesel has remained elevated after prices jumped in February when Russia invaded Ukraine. Diesel prices, which hit an average of $5.81 per gallon in mid-June, are around $5.33 as of early November, according to the U.S. Energy Information Administration. That’s up by more than 40% from January’s $3.70 per gallon. In the Central Atlantic region, which includes New York, diesel prices are $5.97 per gallon.

 

Meanwhile, freight rates have fallen in tandem with lesser demand for goods. According to DAT Freight & Analytics, a freight information provider, the spot rate for a dry van — the most common type of truck used to haul freight — has fallen from $3.10 per mile in January to $2.44 in October. Data from the U.S. Census Bureau and U.S. Bureau of Economic Analysis showed the total value of consumer goods imports into the U.S. fell from $76.4 billion in April to $68 billion in August.

 

According to Truckstop.com, an online marketplace that matches shippers and truck drivers, the break-even cost of driving a truck rose 51% from $2.16 per mile in 2021 to $3.27 per mile in 2022, based on April’s fuel prices.

 

Truckstop.com’s chief relationship officer, Brent Hutto, who is in charge of building and maintaining Truckstop.com’s relationships with external stakeholders, said that the drop in delivery prices is due to lower demand for freight “as the market has cooled back off.” But rates are still higher than the five-year average.

 

He said that the high diesel prices pose a “big challenge” for independent operators and small trucking companies because they can’t get significant discounts on fuel for buying in bulk. “They might get 25 cents off of a gallon of gas, a gallon of diesel fuel. But at the large fleets, probably it’s a dollar.”

 

Hackett is upset brokers have not raised their rates to account for diesel costs. “You would think if prices went up, the brokers would raise the rates. But instead, it went down,” Hackett said. 

 

In response to drivers saying that freight rates should go up to include the higher price of diesel, Hutto said “one can’t dictate to the other what the rates are going to be.”

 

“The United States works on a free-market standpoint. So the carrier that works with the broker negotiates the best rate possible, [and] the broker works with the manufacturing company, the shipping company to negotiate the best rate they can,” Hutto said.

 

At the start of the year, Hackett said he was able to earn around $1,800 to $2,000 in gross income — not accounting for expenses like fuel and tolls — for one trip, which can take up to six hours. Now, he gets paid about between $950 to $1,200, he said. Fuel costs, which used to make up about 30% of trip expenses, now comprise around 60%.

 

This makes some jobs not worth the trouble, Hackett said. He used to work nearly every day. Since July, he sometimes drives only two or three days a week. Three weeks ago, the rates were so low he took a week’s break to relax in Wrightsville Beach in North Carolina, he said.

 

Hackett counts himself as one of the lucky ones who can afford to take a break. His truck, which cost $31,000, is fully paid off.

 

Not everyone is as fortunate. A June report from FreightWaves, a supply chain trade publication and data provider, predicted a “great purge” of drivers after the number of trucking companies that went out of business hit a record high in May this year. 

 

Billy Randel, 70, a driver employed by Crescent Moon Outfitters, a small firm in South Carolina, said current freight rates mean most companies are losing money on each trip. He estimated a company pays about $2 per mile in taxes, and fuel, labor and maintenance costs, while jobs he has seen on load boards offer less. “I haven’t seen $1.66 per mile since the middle of September,” said Randel, who lives in upstate New York when not on the road. “If it were me, I would park the truck and wait.”

 

“I’ve been a truck driver for 30-some odd years. … This is the worst shakeout I’ve ever seen,” Randall said, who is also the chief organizer for Truckers Movement for Justice, an independent group of around 9,000 drivers who advocate for better working conditions.

 

To save money, Randel said that he drives slower. And he has stopped letting the truck idle for the night when he goes to bed, which he used to do to keep warm or cool.

 

There are no federal regulations that force shippers to raise rates to cover the higher cost of diesel. And without a union, it is hard for drivers to demand shippers to increase their rates, said Randel.

 

Randel said that his pay — he gets a 25% cut of each trip, instead of a fixed salary — is half what he used to get up to two months ago. What he earns is “barely enough” to cover his bills as an organizer, like booking a restaurant for a meeting in New Orleans next month. But he said he has few personal expenses and no mortgage. “I’m homeless on the highway,” Randel said. 

Written by

Rachel Phua is a student at Columbia Journalism School. Her stories have been published in CNBC, Nikkei Asia, The American Prospect, and other publications.