President Joe Biden’s recent announcement that the Strategic Petroleum Reserve will release one million barrels of oil reserves per day for the next six months is both welcome and concerning news. It’s welcome because the move is likely to drop fuel prices by 10 to 35 cents per gallon. And it’s slightly concerning because no one who studies the global fuel market believes this is a long-term solution.
Is six months enough time for fuel costs to return to normal? There’s no way to know for sure. When one considers the Russian invasion of Ukraine (and related fuel concerns), lingering supply chain frustrations, and the impacts of a global economy still trying to find its bearings after the pandemic…phew! It’s a lot to take in.
Now more than ever, carriers need a 360-degree perspective of how fuel costs relate to each part of their business—and not just the typical miles-per-gallon and cost-per-gallon stats. We need to look deeper. For example, in the second quarter of 2019, when fuel was 32 percent of revenue (below current levels), the freight and trucking industry experienced record high bankruptcies. More generally, spikes in fuel costs typically lead to a surge in carrier bankruptcies.
But there is hope.
Experts from DAT Freight & Analytics shared a collection of steps carriers can take to minimize the blow of rising fuel costs on their businesses:
OPERATIONS: MAXIMIZE THE RETURN ON YOUR FUEL SPEND
We’ll start with the most obvious of all remedies: slow down. When diesel fuel is the primary expense for your business, using less is the most direct link to savings. But there is so much more you can do.
- A reduction in deadhead mileage offsets high fuel costs, and many owner/operators achieve that goal with DAT One load board network. It’s the largest truckload marketplace in North America, and its users on average reduce empty miles by up to 50 percent. With features like LaneMakers (identifies the most active brokers or shippers on every lane) and TriHaul (suggests higher-paying routes) carriers can maximize their miles.
- Did you know wind resistance accounts for 65% of fuel consumption? Many carriers have seen fuel savings materialize by altering the aerodynamic profile of their trucks and trailers, either by equipping them with add-ons (e.g., nose cones, air tabs, etc.) or by replacing aging vehicles with new trucks designed to create less wind resistance. Add-ons for truck and trailer modification can reduce drag enough to realize fuel savings of as much as 12 percent.
- The trucking industry spends almost $105 billion on diesel fuel each year. Naturally, trucks that run on alternative fuels (e.g., natural gas, battery electric, etc.) remain mostly immune to ongoing fluctuations in diesel prices. But these vehicles represent a very small portion of the industry.
REVENUE: CONFRONTING THE COST OF FUEL
When fuel costs go up (way up, in this case), offsetting those costs isn’t always just about spending less everywhere else. With access to the right tools (and the right data), you can enhance your position in other disciplines that will strengthen your negotiating power and soften the impact of what you’re spending on diesel.
More specifically, when you have access to the most current freight rate data available, you can negotiate from a position of strength and ensure that you’re not leaving money on the table. The DAT One load board network puts in your hands the most up-to-date market rates on every lane in North America. And if you’re an owner/operator who negotiates on the road between loads, DAT One’s mobile app offers the flexibility to post your available trucks along with your rates from anywhere.
Factoring is another useful tool to help you maintain cash flow during a fuel price surge. Factoring companies like OTR also offer cash advance options to cover fuel costs.
EXPENSES: CUTTING COSTS ANYWAY, ANYHOW
One of a carrier’s most impactful assets is fuel cards, which provide discounts at the pump and, in the best cases, access to perks that offer additional savings on common carrier expenses, such as:
- Hotel rooms
Some fuel card programs also offer fleet management and reporting tools as well as purchase controls and spending limits. DAT offers an array of fuel card options, simplifying the process of selecting the program that best meets the needs and objectives of your trucking company.
Furthermore, the DAT One mobile app seamlessly integrates with DAT fuel cards, providing drivers visibility into discounted fuel prices at any given location. The DAT One app also features useful trip-planning resources to help drivers find parking, truck-friendly hotels, rest stops, scales, available loads nearby and a variety of other truck services.
Tackle fuel prices with tools from DAT
Despite the current fuel market volatility, there are clearly steps carriers can take to decrease their spend and offset the skyrocketing price of diesel.
Discover how DAT can help you drive every part of your trucking business so you can protect your profits until prices return to normal.