They say that those who don't heed the lessons of the past are doomed to repeat them. The sharp spikes in diesel prices, the predictions of even higher pricing, and the anger, frustration and despair ...
They say that those who don’t heed the lessons of the past are doomed to repeat them. The sharp spikes in diesel prices, the predictions of even higher pricing, and the anger, frustration and despair in owner/operators’ voices I’ve been hearing of late is chillingly reminiscent of 2000 – the industry’s year of discontent.
That was the year that O/Os pushed to their financial limits threatened to and succeeded in shutting down parts of the country in protest. That was the year when high-profile and normally respected motor carrier executives were so angry over the reluctance of some shippers to raise fuel surcharges to acceptable levels, they took to publically addressing their clients with four-letter words. And that was the year when even conservative government officials, in Ontario at least, became so frustrated by the inability to broker a deal with representatives of the shipping community, the major motor carriers and independent operators, they threatened to re-regulate the trucking industry.
Fortunately, diesel prices did start to come down, providing relief and room for cooler heads to prevail.
But just three years later the same, if not worse factors, are starting to coalesce. And, although the lessons from 2000 should still be fresh in the minds of all, as I read the alarming forecasts of continuing increases in diesel prices, I can’t help but wonder if we are not about to repeat the mistakes of 2000.
So this is my call for all stakeholders – owner/operators, carriers, shippers and government – to pause for a calmer assessment of the situation.
I sympathize with the difficult situation owner/operators and the smaller fleets are in as a result of the sharp increase in diesel prices. The impact of the diesel price spike was likely the central contributor to the 25 per cent thinning of the ranks among small carriers we’ve experienced since 2000 and the greatest decline in owner/operator numbers since the recession of the early 90s. And in 2000 there wasn’t an insurance rate crisis, a suspect economy, and the possibility of disruptions to transborder trade due to acts of terrorism to worry about.
Yet as frustrated as owner/operators may feel it’s important for them to understand that rising fuel costs are an economic and political issue of international proportions that can’t be settled by governments. Protests may force the issue with the public and get the provincial and federal governments’ attention. But our politicians – despite all the flowery talk that would be sure to come – remain basically impotent when it comes to controlling prices decided by economic and geopolitical issues far beyond their control. What they will be most likely to do is call for yet another study to examine pricing practices in Canada’s oil and gas industry. And the study will likely conclude, as have the about a dozen similar investigations before it, that: 1. There is no firm evidence of collusion among fuel suppliers, and 2. It’s not against the law to watch what your competitors are doing and match their price movements.
Carriers too must consider the burden they are placing on themselves and their owner/operators. Fuel surcharges are the most effective way of dealing with the sharp rise in prices. But although many more carriers have surcharges in place than three years ago, how many have used the size of their fuel surcharge as a negotiating tool to get a leg up on a competitor?
Shippers in turn must finally come to grips with the fact that squeezing carriers and owner/operators is a short-term gain which will likely be followed by long-term pain.
The demise of owner/operators and small fleets three years ago was what created the shortage of capacity during the summer months in 2002. And a shortage of capacity not only affects service but is sure to place upward pressure on rates in the future.
– Lou Smyrlis can be reached at 416-442-2922 or email@example.com