SPECIAL REPORT: OOIDA calls for immediate legislative remedy for fuel price spikes

| 4/30/2004

The Owner-Operator Independent Drivers Association met with U.S. transportation policy makers today to stress the importance of passing fuel surcharge legislation as quickly as possible - the effort complements many recent meetings with lawmakers and key staff members.

"Back in 1974, it took lawmakers three days to pass a bill that gave truckers and others the ability to offset sudden fuel price spikes through surcharges," Todd Spencer, executive vice president, OOIDA said. "We need a similar effort soon, not just because of the dramatic rise in prices we've seen in California and the Northeast, but also because the rest of the nation may soon face similar increases."

Truckers in California stepped up protests the last week in April to call attention to huge fuel price increases in that state.

"However, virtually every trucker is significantly impacted by the run up in fuel costs and the possibility those costs may keep climbing," said Spencer.

As of April 30, the national average price of diesel fuel was $1.74 and in California, the average price was $2.26.

Even Alan Greenspan, chairman of the U.S. Federal Reserve, recently said in Washington, DC, the strength of crude oil prices reflected, "fears of long-term supply disruptions in the Middle East that have resulted in an increase in risk premiums."

Spencer said "basically it was a combination of increased cost of fuel in the year 2000 and truckers' inability to offset those costs that started the recession that trucking is slowly recovering from now.

"Then, 250,000 trucks were repossessed and truck manufacturing in the U.S. virtually shut down, as well as many suppliers to the industry. Surely every economic calamity does not have to be repeated over and over again for lawmakers to catch on -- a legislative remedy has to be provided."

OOIDA made the following key points:

  • The price of fuel is the largest expense in a truckers operation, and it is the one cost that no amount of competition can change.
  • Truckers operate on about a 2 percent margin. On $100,000, that's only $2,000. To put it into perspective, a 10 percent increase in fuel wipes that out.
  • About 70 percent of the trucking industry is made up of motor carriers with six or fewer trucks. The low entry barriers to the trucking business create an atmosphere of intense competition in which motor carriers operate on the thinnest of profit margins and only a handful of very large motor carriers have the power to actually set their own rates. When fuel prices go up, that profit margin is quickly erased.
  • Many owner-operators who have been forced to quit the trucking business have been those with the most experience and were therefore some of the safest drivers on the highway. It simply becomes too expensive to run their truck. They will be replaced by inexperienced drivers who themselves will face the same obstacles to success.