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The Cost to Hire a Trucker Is Crashing, but It’s the Busiest Time of Year

Neil lives in Canada and writes about society and politics.
Published: May 13, 2022
Truckers are getting paid less to deliver goods despite this normally being the busiest time of year.
A truck participates in the People’s Convoy as it drives on the Capitol Beltway on March 7, 2022 in Bethesda, Maryland. Data shows that what truckers are getting paid to deliver goods is actually crashing during the busiest time of year. (Image: Kevin Dietsch/Getty Images)

The market to contract a small trucking operation to carry goods is crashing despite this being the busiest time of the year, states a new report.

Industry analyst website Freight Waves reported on May 12 that the velocity of the trending decline of truckload van spot rates suddenly nearly doubled starting on May 7, falling from an average daily loss of 0.011 cents per day to 0.02 cents per day.

Freight Waves noted that the 0.011 cent daily fall was already an increase that started on May 3 after remaining steady at 0.007 cents per day throughout April.

According to the firm, spot rates have fallen approximately 12.96 percent to $2.02 per mile from $2.30 per mile on April 11.

SHRINKFLATION AND ECONOMIC CALAMITY

Although a decline in the cost to ship goods may be seen by some as a good thing amid escalating inflation, Freight Waves sounds something of an alarm due to the time of year the change is occurring, “The acceleration in the rate of decline is remarkable, especially considering the time of year.” 

“May and June are normally considered among the busiest times of year for truckload volumes and the early summer months rival the holiday retail season in terms of peak spot rates,” author and CEO Craig Fuller wrote. 

Fuller continued, “The phrase ‘100 days of summer’ is used in the trucking industry to describe the time of year when beverages, construction, and summer goods all surge.” 

“This year, the market is doing the opposite.”

The outlet noted that unfortunately for operators and contract drivers, the decline coincides with massively rising costs of doing business, especially the price of diesel, which made a new all time high in early May when it broke $5.50 per gallon.

According to U.S. Energy Information Administration data, prices have not abated, setting a new average high of $5.62 per gallon the week of May 9.

Some truckers have reported paying more than $1,200 to fill up. An average fuel tank is approximately 150 gallons, and some trucks are equipped with two for long haul purposes.

The average semi truck averages approximately 6 miles to the gallon, which means truckers are paying an average of 93.6 cents per mile in fuel costs alone.

But Freight Waves notes that the crisis is not affecting all trucking companies equally.

In an April 28 article, the firm noted a marked difference in economic impacts endured between similarly sized firms who ship similar goods to similar retailers resulting from the presence—or absence—of long-term contracts. 

“The indicators are pointing to a K-shaped market for the trucking industry. Large trucking companies, which have long-standing contracts with their clients, will be able to weather the crash in spot market rates — even as contract rates begin to dip.” 

“Meanwhile, the small-time truck drivers who have flooded the market since the pandemic began are set to struggle,” author Rachel Premack wrote.

A second graph by Freight Waves showed that the “Van Contact Linehaul rate,” which it describes as “the rates paid from shippers to carriers, under contracted rate agreements for truckload services,” remains high at $2.94 per mile by comparison.

However, the firm also noted that during the Coronavirus Disease 2019 (COVID-19) pseudo-pandemic era from April of 2020 all the way through the beginning of 2022 that spot rates had exceeded contract rates by as much as 31 cents per mile.

The graph revealed, however, that pre-pandemic between 2019 and 2020, spot rates varied between $1.75 and $1.50 per mile, falling briefly under $1.25 when the flames of pandemic hysteria were fanned the hottest by establishment media and governments.

EIA data showed, however, that in 2019 an average price for diesel was $3 per gallon, while in 2020 that figure was $2.50.

The article elucidated how the decline in spot rates affects the bottom line of owner operators and drivers, “A dry van job running bottled water from the Philadelphia suburbs to the warehouse giant of Carlisle, Pennsylvania, paid $1,200 last December. Starting next month, that same job will pay $756.”

Data analysis firm Cass Information Systems noted in its April Transportation Index Report that freight index expenditures are up 30.6 percent year over year and a staggering 89.6 percent based on its “2-year stacked change.”

Additionally, Cass is finding that, despite being in the “100 days of summer” period, that shipment volume was down 0.5 percent year over year and 2.6 percent month over month.

Cass commented, “Freight was slowing even before the war in Europe began, but the effects of the additional surge of inflation and recent interest rate increases seem to have push [sic] volumes over the edge.”

“After a nearly two-year cycle of surging freight volumes, the freight cycle has downshifted with a thud,” they continued.

“It’s possible the April data include some indirect impact from lockdowns in China, but with container ship backlogs still off North American ports, the direct effects on finished goods imports seem more likely in the June/July timeframe.”

DAT Freight Analytics also noted that the spot market for flatbed trucks in U.S. industrial regions is also aggressively cooling in a May 11 article, “Spot rates dropped to $3.28/mile excl. FSC, which is $0.82/mile lower m/m and $0.69/mile lower than the previous year.” 

“In Houston, DATs largest flatbed market, capacity also eased on the number one lane north to Ft. Worth weather spot rates dropped by around $0.50/mile below the April average to $3.37/mile excl. FSC this week,” they added. 

And continued, “Capacity also eased for loads to the Permian Basin oilfield last week, with spot rates down by $0.40/mile below the April average to an average of $3.28/mile excl. FSC.”

DAT noted, however, that prices are still high: “That’s still $0.67/mile higher than the previous year.”