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Truckers and Cabbies are Hurt by High Gas Costs

The rising price of fuel eventually affects everyone. But it hits those in transportation-related industries first.

"The first people to see it are the trucking companies, because their truck is empty at the end of the day, and they need to fuel up," says Kristen Monaco, an economics professor who specializes in trucking at California State University, Long Beach.

"And the same thing with the cab drivers," Monaco says. "Then eventually those costs get passed along to the manufacturers, and then eventually those costs get passed along from the manufacturers to the consumers. So it affects everyone in sort of this chain, and the first people affected are the airlines, the trucking companies, and cab drivers."

"Fuel is probably the biggest single cost in trucking, in running either a trucking company or for a small-business trucker," says Joanne Ritchie. She's the executive director an owner-operator's business association. It represents small independent truck operators.

Monaco agrees. She says trucking companies spend about a third of their budgets just on fuel.

"That's about an average -- it depends, obviously," says Monaco. "When fuel prices go up, it becomes a larger share of their budget, but then they pass along those increased fuel prices by adding surcharges to their customers."

Those customers are typically manufacturers. They respond to increased shipping charges by increasing the cost of their goods. This means consumers like us must pay more for everything in the stores.

But as the economy improves, more freight is being moved, despite the increased fuel costs. This bodes well for employment opportunities in the trucking industry.

"Right now there's a lot more freight being moved throughout the U.S. so they are in fact hiring more truck drivers," says Monaco. "So it's sort of a good time to get into the trucking industry, because when more stuff is being trucked, there's an increased demand for labor.

"They start offering signing bonuses and training programs and safety rewards and all these things, and it actually makes it a good time to be a truck driver."

Like truck drivers, taxi drivers are immediately affected by rising fuel prices.

"There's a thin line for financial viability for the taxi companies, or the taxi drivers, especially when the economy is going through a downturn," says Mohan Kang. He's president of a taxi association. "So anything and everything which takes that money away from them has to have a negative impact."

Unlike trucking companies, taxi drivers can't pass along the increased fuel prices to their customers. They can't charge a surcharge because their rates are regulated. Those extra fuel prices add up.

"Fuel or gas is a thing which you need on a day-to-day basis, especially in the taxi business -- it's not like a private car [where] you fill it once and it might go for two weeks or something," says Kang.

"In the taxi industry, depending on the region... or type of car you're driving, it could be $25 to $60 a day or more."

One thing that taxi companies can do is switch to high efficiency or hybrid cars. Kang says many companies bought hybrid cars a few years ago when fuel prices hit new highs.

He explains that, although the hybrid cars may cost more than a traditional car, they need far less gas to operate. He says that companies were gaining financially in the long run because of savings on fuel costs. Another benefit is that hybrid cars are more environmentally friendly.

Some jurisdictions are requiring large taxi companies to buy high efficiency or hybrid cars when they want to get additional licenses for new taxicabs. (Smaller companies are often exempted because of the cost).

Kang says he has not seen taxi companies going out of business due to rising fuel prices. But he has seen some companies cut back on service.

"The small companies might curtail their business," says Kang. He gives the example of a company with 10 vehicles offering 24/7 service. This company might use fewer than 10 vehicles at any given time. This would ensure that all the drivers can have enough earnings and they're not running unnecessary vehicles and using more gas.

Not all trucking companies are able to pass on their rising costs to their customers. This is especially true for small, independent trucking companies and individual owner-operators.

"There's a number of things you can do to reduce your costs overall, but there's not a lot you can do to reduce the price of fuel at the pump," says Ritchie.

"And it's very difficult to pass that on to the consumer, as well, because there are so many layers in there and each consumer doesn't want to pay more for their goods. So often it's the truck driver, the small-business truck driver, that absorbs a lot of that cost, so it makes it really tough on them."

Trucking companies both large and small have a big incentive to minimize their fuel costs.

One thing they do is restrict the speed of trucks. "You don't want to go too much over 60, 65 miles per hour because that's not fuel efficient and in trucks where you maybe get six to eight miles per gallon, you really want to aim for a lot of fuel efficiency," says Monaco.

"So [there are] governors which they put on the engines to keep trucks from speeding, basically."

Also, large trucking companies have long-term contracts with different diesel vendors so their drivers get a discount when they go to those vendors.

Trucking companies also try to consolidate loads and dispatch efficiently to try and make sure that when the truck goes out they also have a load coming back, so it's not a waste of fuel. "Kind of like people combining errands into one big trip to make sure they're not wasting car trips," says Monaco.

Trucks have gotten more fuel efficient and more aerodynamic over the last 10 or 20 years. This has reduced their fuel consumption. But trucking companies don't have viable alternatives to fossil fuels, at least not yet.

"There's not really the technology right now for long-haul, non-fossil-fuel-based transportation," says Monaco.

"Most of the alternative energies have to go in relatively light vehicles that don't have a lot of horsepower. So if you're thinking about pulling freight, there's no technology that exists right now... that is not related at all to fossil fuels.

"Obviously, there's LNG, so trucks that move on propane or liquefied natural gas, but... we're not going to have battery powered," Monaco adds.

"We're not going to see that for a while. The technology would have to be a lot lighter, because... what would be needed in terms of battery power to motorize a semi truck which is hauling a trailer of goods, that is a lot. The battery would probably weigh more than the load they want to carry."

Rising fuel prices are likely here to stay. "I think most firms are planning for a stable upward trend in fuel prices," says Monaco.

This means truckers, taxi drivers, and everyone else affected by rising fuel prices -- which is all of us -- will have to adapt to deal with this upward trend.

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Truckers and Cabbies are Hurt by High Gas Costs

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