Simply said, perspective is the ability to see things in a true relationship. In February, I wrote the following letter to President Clinton, bringing to his attention the severe economic hardships falling on tens of thousands of small business truckers. But another purpose behind the letter was to impart perspective, as the fuel crisis is only a symptom of a much larger problem. Until this nation's leaders see that the progress of the nation requires that the needs of the transportation industry advance accordingly, the problem won't go away. I urge you, as truckers, to join me in sharing this perspective with your elected representatives and those about to be elected. Here is my letter to the president:
Since early last year, the price of diesel fuel, the top cost item for most small trucking businesses, has been rising steadily. Over the past three weeks these increases have come at such a rapid pace (especially in northeastern states) that many small business truckers not only view bankruptcy as a possibility, but almost a certainty unless relief comes quickly.
At this time one year ago, the average cost of a gallon of diesel fuel needed to operate a truck was less than a $1.00 a gallon. By mid-January 2000, the average price per gallon had climbed to $1.30. In the past three weeks the average price, as calculated by the U.S. Department of Energy, has increased by another 17 cents per gallon. That's approximately a 50 percent increase in fuel costs over the past 12 months.
Average prices only tell a part of the story. Hit particularly hard are those small business truckers located in or trying to serve the northeastern states. Fuel costs account for anywhere from 20 to 30 percent of the annual revenues of most small business truckers. Due to the competitive nature of the trucking business, in general, and the extremely weak bargaining position of owner-operators in particular, very little of the increased costs for fuel have been offset by increased freight rates or increased revenues to the owner-operator. Even without increased costs for fuel, the net annual income for most owner-operators is no more than $35,000. With higher fuel costs, these already meager revenues can shrink by one-third to one-half if they continue to operate. Some truckers have already stopped picking up and delivering freight, particularly in the Northeast United States. These drivers figure it's better to just cease operations than to continue to subsidize a trucking operation with revenues that are needed for household expenses like mortgages, food, and their children's clothing, etc.
Small business is the backbone of the U.S. economy, and small business truckers are the backbone of the U.S. transportation industry.
Trucking has played a key role in the still booming U.S. economy that has brought prosperity to many Americans. Few owner-operator truckers and professional drivers have been beneficiaries or participants in this unprecedented prosperity. In reality, most of the productivity improvements in trucking have come from the backs of drivers working even harder each year of the past decade. With the recent run up in fuel prices, it is no longer physically or economically possible for them to work hard enough to squeeze by.
Executive action is required. America should not be held hostage over oil prices by OPEC nations (some of which have obviously forgotten the U.S. Military's efforts of just a few years ago to safeguard their very existence). Every diplomatic effort should be made to establish long-term purchase and pricing policies that will foster the common economic welfare of all countries involved.
America should not be held hostage by domestic or foreign oil suppliers that might find it economically attractive to maintain minimal oil reserves in anticipation of heightened demand during the winter months. Indeed, as I write this letter, I have just learned that diesel and heating oil fuel distributors in the Northeastern United States, intentionally maintained distillate stocks almost 30 percent below last year's level! Neither heating oil for homes, or diesel fuel for trucks bringing needed goods to our citizens, are discretionary items. These fuel uses are critical to the common well being of the nation. And it is the role of government to foster the common well-being of its citizens.
Members of our organization believe in free markets, but when those free markets are used or abused to extort hefty sums from citizens for non-discretionary items like home heating oil and diesel fuel used in interstate commerce, government action is warranted.
I understand that Energy Secretary Bill Richardson believes that free markets should dictate prices and the markets should flow on their own, but there is nothing free about an OPEC oil cartel that exists solely for the purpose of driving up prices - activities that are totally illegal in our country!
We're already seeing government action in this area of reactionary nature. Lawmakers in the state of Massachusetts have approved $10 million in aid for families to heat their homes. According to news sources in the state, the $10 million is in addition to $55 million in federal aid that is used for heating assistance for poor people. I'm confident other northeastern states are adopting similar strategies with state and federal tax dollars for their residents. (Collectively, this amounts to $200 million and rising.)
Because diesel fuel is almost identical to home heating oil, when the temperature drops, the price of both products skyrockets. We believe that rather than providing direct government assistance for the high costs of heating oil, tax dollars would be better invested in providing incentives for homeowners to switch to alternative forms of energy, like electricity or propane. If government were to provide meaningful incentives to switch, many homeowners would do it. These incentives might even be enhanced by incentives granted by electricity or propane providers. Once demand for home heating oil starts declining, the price of diesel fuel will become much less volatile.
Winter is not a natural disaster like hurricanes or floods that might require federal disaster aid. Winter comes every year, and determining whether families can heat their homes, or truckers can deliver goods to area grocery shelves, should not be a guessing game. If tax dollars are to be used in a reactionary manner to address a regularly recurring problem, it surely makes more sense to use (or invest) those dollars in establishing a solution.
In this last year of your administration, I challenge you to initiate a mechanism or a process that will provide some measure of assurance of reasonable fuel pricing and availability to the American public - specifically senior citizens on fixed incomes, and small business truckers engaged in the delivery of needed goods.
Perhaps the fuel situation the nation is experiencing doesn't qualify as a national emergency of the scope currently required to tap into the nation's Strategic Petroleum Reserve. We believe it should. The OPEC nations are unconcerned about the economic harm their actions may inflict on the U.S. economy or any of its citizens. Is this not an economic assault on U.S. interests? The actions of the OPEC nations in the mid 1970s triggered double-digit inflation that our nation didn't get a handle on until a decade later. We believe the Strategic Petroleum Reserve should be used precisely to counter this type of economic assault. To do otherwise is an open invitation to extortionate practices. We also believe the U.S. Attorney General and/or other appropriate federal agencies should move swiftly and aggressively to determine if price gouging and willful supply manipulations are occurring to boost oil prices to exorbitant levels. We do not believe it is merely a coincidence that U.S. crude oil inventories are reported to be at a 23-year low. America's economic interest should not be held hostage by greedy oil interests, whether foreign or domestic!
But the fuel crisis is only a symptom of a much larger problem. Your administration has already recognized driver compensation as a factor in highway safety for the nation. On Aug. 2, 1999, U.S. Transportation Secretary Rodney Slater, and Federal Highway Administrator Kenneth Wykle, sent to Congress the "Motor Carrier Safety Act of 1999," designed to reduce truck-related deaths by 50 percent over the next 10 years.
Among the provisions of the "Act" was a comprehensive study of the methods used to compensate truckdrivers and how those methods may contribute to safety. A specific focus was to be placed on the exemption from the Fair Labor Standards Act's provisions for overtime pay that exists solely for truckdrivers. Because of the per mile compensation formulas for drivers now used in trucking, many drivers will work 30 to 40 hours per week for no compensation at all. If drivers and owner-operators were compensated for all of the time they work in trucking, they would not be economically devastated when fuel prices rise. If they were adequately compensated, they would not be protesting at state capitols in Rhode Island, Massachusetts and New Jersey as they are now.
OOIDA supported creation of a Federal Motor Carrier Safety Administration. Unfortunately, the driver compensation study was not included as a part of the legislation passed by Congress. This, we believe, was a tragic omission by Congress. We also believe there is definitely a correlation between inadequate compensation and highway safety; and when fuel prices skyrocket as they have for the past few weeks, the cumulative effects of too many years of inadequate compensation spells financial disaster for hundreds of thousands of small business truckers.
The trucking industry has made a tremendous contribution to the economic revitalization of our nation's economy, but that contribution, in the future, cannot be assured. Few, if any, motor carriers have the ability to set and maintain compensatory freight rates when dealing with even moderate sized shippers due to the extreme competitiveness of the industry. All the economic leverage lies with shippers. When fuel prices shoot upward as they are now, the only alternative that many in trucking see as viable is to withhold their services that can create a disruption in the delivery of goods. These actions benefit no one.
We can do better. We must do better. I urge you to initiate immediate and decisive action to address these very serious problems.