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Feature

Why oil prices matter to owner/ops


Oil prices are something that every owner/operator should pay close attention to. They have a huge impact on how much you can earn; for some, low oil prices are better, such as for those with trucks that cannot achieve the fuel mileage set in the fuel surcharge or those setting their own rates on a spot hire basis without a fuel surcharge and buying their own fuel.

For others, high fuel prices are better. If you are achieving fuel mileage above the threshold for the fuel surcharge, the higher prices get, the more of the surcharge you get to keep. There comes a point where you actually get paid to put free fuel in your tanks if prices rise high enough.

However this is trucking and it’s never that simple. Both high and low fuel prices have another big effect on our profits and that is the impact they have on the economy in general. Low fuel prices have a major impact on our economy, as oil is big business in North America. Low oil prices mean layoffs in the oil industry and that means less freight to move. It isn’t just those directly involved in moving freight for the oil industry either; if people are not working, they stop spending, so there’s less freight to move overall. Another consequence of this is that those who normally haul directly for the oil industry have trucks sitting idle, so they look for other work and now not only has general freight slowed down, there are more trucks available to move it and rates drop as a result.

High oil prices on the other hand work in a different way, but with the same result. Oil industry workers are earning and spending. High fuel surcharges mean we’re earning good money, so it sounds like a win-win situation. However, not everybody works in oil or trucking and the cost of manufacturing goes up as raw materials become more expensive and the cost of moving stuff increases.

So we need a happy medium, but we have no way of influencing that. However, we can manage the way that it affects us.

First and foremost, fuel mileage is our best weapon. If we’re achieving high numbers then we can still make a decent living in the leaner times and during the highs we can make enough to stash some away for the inevitable rainy days.

Where you are based and what you haul can also play a big part in how successful you will be. If you’re hauling for the oil industry and based in Ft. McMurray, you will make a fortune in the good times, but not so much during the bad times. On the other hand, if you’re based away from the oil patch and hauling Tim Horton’s coffee, the only thing that will affect your earnings would be a nuclear war.

Now, those are extremes of course, but the point is that boom-or-bust may be fantastic at times, but slow and steady can be good all the time.

Another factor that is having a big impact on rates and freight volumes is the amount of trucks out there, or more specifically the amount of drivers available to operate them.

Oil prices have no influence whatsoever if there are no trucks around. Looking at the average age of drivers today, there will soon come a time when we really are running out of truck drivers and the companies that have trucks and drivers ready to work will be able to name their price.

It’s during times like these that the next big carriers will be born; at one point all those big box carriers started out as owner/operators, now some of them down south are running tens of thousands of trucks. They grew because freight volumes grew, due to the increase of grocery chains and the ease of movement once the interstate network developed, but the next generation of big box carriers will grow due to having enough drivers to fill their trucks and some of these will be current, or even future owner/operators.

Of course it won’t be easy, it never is, but it is possible. When the shortage becomes a crisis all the factors that prevent an owner/operator from becoming a carrier go away. You will be able to get direct work from customers as the bigger carriers cannot supply trucks as they have no drivers, you will be able to command a decent rate, you can negotiate fuel prices down with suppliers, trucks will be cheaper, finance providers will be fighting among themselves to give you the best deal – the advantages just keep on getting better and better.

At this point you will be able to pay drivers significantly more than current drivers are earning and the current potential new recruits to the industry are turning down and this will make trucking an industry that youngsters will want to be a part of once again – all it’s going to take is a few owner/operators or small fleets to make it happen.

It all sounds too good to be true, but that’s only because we’re so used to over-complicating things that we’ve lost sight of the basics, not just in this area, but in almost everything we do and that is how we’ve gotten into the situation we’re in now.

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A fourth generation trucker and trucking journalist, Mark Lee uses his 25 years of transcontinental trucking in Europe, Asia, North Africa and now North America to provide an alternative view of life on the road.