Fuel costs having a trickle-down effect on store prices
April 16, 2008
April 16, 2008
I stopped by my local Tim Horton’s the other day and noticed my coffee had increased in price from $1.56 to $1.65. A sign in the window said the price increase was due to increased operating costs. It didn’t specify transportation, but it didn’t have to.
More and more companies are inching up the prices of their goods to help offset increasing transportation costs. In her monthly column ‘Voice of the Owner/Operator’ appearing in the May issues of Truck News and Truck West, OBAC executive director Joanne Ritchie asks the question: ‘What’s happening to all the surcharge money paid out by shippers?’
She reasons that if the cost of goods on stores shelves is increasing, then someone’s getting paid. Unfortunately, owner/operators still regularly complain that they’re not receiving all of, or in some cases even part of, the fuel surcharge being levied by their carriers.
Like Joanne, I hear from these guys all the time, wanting to know what their rights are. Beyond working for a carrier that will pass on the fuel surcharge to owner/operators – I don’t have a helluva lot of advice. I’ve also heard from owner/operators that are doing very well, thank you. Those are the ones who are rightly being paid the fuel surcharge collected by the carrier they are leased to. In some cases, the fuel surcharge they collect accounts for a higher amount than their actual mileage rate. Without the fuel surcharges, they’d be toast.
Diesel prices continue to surge, outpacing even the increase in gasoline prices that everyone’s been bemoaning lately. Today’s Toronto Star has an interesting article on the subject. In the article, Spencer Knipping, a petroleum analyst with Ontario’s Ministry of Energy says: “The diesel story is simply amazing. It reflects the fact that diesel demand has been growing more strongly than gasoline demand worldwide, and that there’s a somewhat more limited refining capacity for it.”
The article goes on to blame, among other things, an increase in the popularity of diesel-powered passenger vehicles. It seems that cost-conscious consumers are buying diesel-powered personal vehicles to shave down their own fuel costs. With a limited diesel refining capacity, the old supply and the demand equation is driving the cost of diesel up exponentially. Over the past year, diesel prices have shot up 30% while gas prices have experienced a more modest increase of 10%.
I’m no economist, but I do fear that unrelenting fuel prices may be the catalyst that pushes our economy into further decline. More consumer spending is being diverted towards the cost of energy, which leaves less for dinners out, clothing, entertainment, etc. It’s that consumer spending that really drives our economy. I don’t see any immediate, or even long-term, fix for this dilemma. Fortunately, there are a whole lot of people that are smarter than me working on it. Let’s hope they find a viable, long-term solution to escalating fuel prices before our economy reaches its breaking point.
James Menzies is editor of Truck News magazine. He has been covering the Canadian trucking industry for more than 15 years and holds a CDL. Reach him at firstname.lastname@example.org or follow him on Twitter at @JamesMenzies. All posts by James Menzies