Congress Hears Testimony on Diesel Prices and Trucking

May 06, 2008

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"Rising Diesel Fuel Costs in the Trucking Industry" was the topic of a Congressional committee hearing Tuesday before the Subcommittee on Highways and Transit of the House Transportation and Infrastructure Committee.

"The men and women in the trucking industry ... are ... facing situations that were unimaginable just a few years ago," said committee chairman James L. Oberstar in a prepared statement that was read into the record. "The cost of a gallon of diesel fuel has risen 48 percent in the past year; 78 percent in the last three years; and 166 percent since 2003. Every one-cent increase in the price of diesel fuel translates to an annual additional cost of $391 million to the trucking industry. It costs nearly $800 more for a driver to fill a standard tractor-trailer than five years ago."

As for the proposal that Congress enact a "fuel tax holiday" this summer, supported by Presidential hopefuls John McCain and Hillary Clinton, Oberstar said, "This irrational proposal will bring the Highway Trust Fund to the edge of insolvency."

Oberstar also said the hearing would look at the issue of fuel surcharges. "Today's hearing will examine the relationship among motor carriers, brokers, shippers, and independent drivers with respect to setting and collecting fuel surcharges," he said. "Currently, fuel surcharges are left to the discretion of an individual motor carrier or broker arranging for transportation, with few disclosure requirements and without any government oversight. This lack of transparency affects independent owner-operators and drivers who often do not control if, and what amount, a broker or motor carrier charges a shipper for the rising cost of fuel."

Subcommittee Chairman Peter DeFazio (D-Ore.) testified at the hearing that while every American driver is impacted by the dramatic gas price increases, the rise in fuel costs has had a particularly significant impact on the trucking industry.

"Each time the price of fuel increases by 5 cents per gallon, a trucker's annual costs increase by $1,000," DeFazio said. "When the average trucker feels the pinch of gas prices, the increased cost of transporting goods to market significantly affects the price of many consumer goods."

American Trucking Associations State Vice President Mike Card called on Congress to support the trucking industry's efforts to reduce fuel consumption and address the escalating cost of fuel in efforts to ease the financial hardships of the nation's motor carriers.

Testifying on behalf of the American Trucking Associations, Card, who is president of Combined Transport, said the dramatic increase in the price of diesel combined with a downturn in the economy and softening demand for freight transportation has many trucking companies struggling to survive.

Card asked Congress to create incentives to speed the introduction of auxiliary power units to reduce main engine idling, establish a 65-mph national speed limit and support the Environmental Protection Agency's SmartWay program.

"Our industry can't simply absorb this rapid increase in fuel costs," Card said. "We must pass some of these costs through to our customers, which ultimately translate into higher prices on the store shelves."

Card, whose Oregon-based family-owned trucking company operates more than 400 trucks, expects to spend more than $21.7 million on diesel fuel this year, a 26 percent increase from 2007. The trucking industry overall is on pace to spend $141.5 billion on fuel in 2008, $29 billion more than a year earlier. ATA believes that balancing the need for an efficient petroleum market with the desire to limit petroleum speculation could help burst the bubble that has formed in the petroleum markets.

In agreement with ATA on a desire to limit petroleum speculation was a group that is often at loggerheads with the trucking industry, Public Citzen. Among others testifying at the hearing was Tyson Slocum, director of Public Citizen's Energy Program. He told the subcommittee that at least $30 of the current $115 of a barrel of oil - or about 70 cents of a gallon of a gasoline - is attributable to pure speculation, unrelated to supply and demand. Re-regulating these energy markets will introduce the transparency and disclosure necessary to combat harmful speculation that is making hedge funds, investment banks and oil companies rich at the expense of everyone else, he said.

Among others scheduled to testify were John Felmy, chief economist at the American Petroleum Institute; Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association; and Ryan Todd, integrated oil analyst with Deutsche Bank AG.

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