Robert Possamai rolled the dice when he decided to get into the trucking business two short years ago. He knew the industry was long past the point of giving away easy rides, but figured he was as good as anyone to answer the call of a small wood contractor 90 km off-road in the woods of Sault Ste. Marie, Ont.

Knowing fuel was a major concern for truckers, he made sure to save a lot of room for diesel in his budget. Still, he never expected this.

Today, even after winning a modest fuel surcharge from his customer, his brand new 2005 International 9400i spends its nights sitting up against the fence with a for-sale sign in the windshield. It’s been a couple weeks, but so far, no takers — the truck’s too heavy. Maybe a shipper will come knocking.

“A lot of the companies in the area that depend on [owner-ops] are having to buy their own trucks to cover their needs,” he tells Today’s Trucking.

Although his stint in trucking has been short, and one could argue he hasn’t earned sympathy, he truly does love working the wheel, and he doesn’t want to give up just yet.

“I always say it’s a good thing my wife has a good job to support my trucking habit,” he says. “I will continue to work the truck until it sells or until I could go to work for a bigger company.”

However, he’ll need luck on his side when one considers the fuel forecast experts are predicting — or at least trying to predict.

Ron Rosnak, senior petroleum adviser for En-Pro International — an Oshawa, Ont., consulting and pricing intelligence firm of industrial commodities — says that 2006 is one of the most difficult years the company has ever faced when preparing an annual budget projection.

It is also perhaps the most alarming — despite some recent relief at the diesel pump in October and November.

While they know for sure that next year will definitely bring higher energy rates as well as costs of other goods and services, it’s difficult to pinpoint just how much. Crude, guesses En-Pro, will likely average out to $68 US a barrel, but in a worst case scenario, could level off
at $80.

For diesel, a distillate fuel, En-Pro (www.en-pro.com) predicts for next year about an 11-percent increase over the 2005 average registered up to the end of September; and about 5 percent more than what the final 2005 average will be — meaning that when the dust settles at the end of the December, diesel prices will be much higher than what we’ve already seen; especially if it’s a colder winter than usual.

Supply and demand, as well as inventory levels, have traditionally played a significant role in affecting fuel prices — as truckers saw when Hurricanes Katrina and Rita knocked out production on the Gulf Coast and choked supply. However, Rosnak says a newer and growing factor is “speculators” on the NYMEX, which are motivated by just about everything: capacity, weather, political unrest, global economics, and basically the general mood traders are in on any given day.

“The commodity market has become like a stock market,” he tells Today’s Trucking. “Inventories are actually better now than they were last year, especially on crude and distillates, but now you have prices 40-percent higher. It doesn’t follow conventional reason.”

And there’s no indication that the game will be played closer to the rules of the good ‘ol days when oil prices were more fixed for the short-term.

Ten years ago, reports a recent Washington Post article, an average of 94,450 futures contracts for light sweet crude oil traded hands each day. To date for 2005, the daily average is 238,000 trades, with a high of over 406,000 trades on August 30, 2005. Furthermore, in 2002, a half-size version called the emiNY was created so that smaller, individual investors could enter the commodity market. It has grown from 1,100 trades a day in 2003 to 12,700 in 2005.

So where does much of the profit from those driven prices go? If you went out on a limb and guessed the oil companies, you’d be right.
Rosnak says that fully integrated oil companies — with their own oil fields, refineries, and marketing departments — inflate their margins internally. When the company takes crude out of the ground, they sell it to their own refinery “on paper” at market prices above what it might cost to produce.

“So you have a profit there,” explains Rosnak. After the product is refined, it’s again held up to import-export market trends, and that’s how the rack price is developed. The differential between crude and the rack price is the profit referred to as the “crack spread.”

“What we don’t know is what refining sells it on paper to the marketing department for,” he says. These “profit centres,” as Rosnak calls them, can create margins as large as 30 or more cents a litre.

This extra flexibility may lead to price wars, predicts Rosnak — especially in the cardlock market.

“The high crack spread allows them to get competitive. It could even push prices at cardlock lower than bulk,” says Rosnak. “After all, if your crack spread is 32 cents, and you sell it two or three cents lower than rack, you’re still making 30 cents. They’re still making a killing.”

Indeed. And it’s killing guys like Possamai, to be sure.