Trucking industry paying $7 billion more for diesel fuel 11/10/04

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Higher fuel prices are starting to put a squeeze on the food industry.

 

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CONSUMER AFFAIRS

HIGH-PRICED HAULING

 

Wednesday, November 10, 2004

 

BY BILL SULON

Of The Patriot-News

 

The trucking industry is rolling forward despite near-record prices for

diesel fuel.

 

Demand for diesel fuel is up 3.8 percent from a year ago, a sign the

economy is improving, said Tavio Headley, staff economist with the

American Trucking Associations in Alexandria, Va.

 

But the demand has been tempered by the cost of fuel -- a nationwide

average of $2.16 a gallon this week, down from a record high of $2.21 a

gallon two weeks ago but still nearly 70 cents a gallon more than

truckers were paying a year ago, according to the Energy Information

Administration.

 

The trucking industry is paying $7 billion more for diesel fuel now than

it cost for the same amount of fuel last year, Headley said.

 

And the trucking companies are starting to pass those costs along to

customers.

 

"We really can't quantify what's being passed on, but fuel surcharges

are more prevalent," Headley said.

 

Those surcharges paid by customers who receive goods by truck could

eventually be passed along again, to consumers.

 

Higher fuel prices "either hurt the profit of a company if it can't pass

the costs along, or it adds to the prices consumers pay if fuel costs

are passed along," said Stuart Hoffman, chief economist with PNC

Financial Services Group. "Or you'll see a combination of the two."

 

Giant Food Stores LLC, based in Carlisle, uses 100,000 gallons of diesel

fuel a month in its trucks to transport produce, meat, seafood, dairy

products and other foods to its 119 supermarkets.

 

"Our cost of doing business goes up proportionally with the cost of

fuel," said company spokesman Dennis Hopkins, who noted that Giant's

monthly costs for diesel fuel have increased $50,000 since the beginning

of the year.

 

The worst could be over. Crude-oil prices have fallen to less than $48 a

barrel, a two-month low, after topping $55 a barrel two weeks ago.

 

Hoffman said he would be more concerned if crude-oil prices remained high.

 

"The longer it stays up there, the more harm it does to the U.S. economy

and the global economy," said Hoffman, who believes crude-oil prices

will settle at closer to $45 a barrel.

 

Higher costs haven't quenched the thirst for more fuel. The total weight

of all goods transported by truck is up 7 percent from a year ago,

Headley said.

 

"As the economy does better, there's more demand and more of a need to

get goods transported," he explained.

 

Major carriers like FedEx, United Parcel Service and Yellow Roadway

cushion the impact by buying fuel in bulk. For many smaller businesses,

there is no such leverage.

 

"It's making it tougher," said Zach Alger, custodian at Palmyra-based

Alger Farms, which grows corn, soybeans and wheat on 7,000 acres in the

midstate. "We have no way of passing it along. We have to sell at

whatever the market is at."

 

At Wertz Coal Yard in Mechanicsburg, the flat fee consumers pay for

delivery of coal has increased 100 percent since last year.

 

"It was $5 last year," said Dean Rebmann, an employee at Wertz. "We

moved it to $8 last month, and now it's at $10."

 

BILL SULON: 255-8144 or bsulon (AT) patriot-news (DOT) com

 

Copyright 2004 PennLive.com. .

 

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