Costello: Industry better able to handle fuel increases than in past
BOB COSTELLO
By LYNDON FINNEY
The Trucker Staff
3/11/2008
ALEXANDRIA, Va. — While he’s “shocked” at the price of a barrel of oil reaching $108, at the same time the chief economist of the American Trucking Associations said the industry is in a much better position than it was 10 years ago to handle such a situation.
“While this is very, very difficult for all carriers, the small firms all the way up to the big firms, imagine if this would have happened 10 years ago, the exact same thing,” Bob Costello said.
Ten years ago, the industry did not have the fuel surcharge mechanisms in place it has today, Costello noted.
“We would have had complete carnage. If there is one thing that is very clear out of all this, and I don’t want to leave the impression that this is not a very serious and concerning thing for the industry, we are in an industry that has matured. That doesn’t help anybody that’s trying to fill up their truck, and I think you will see more failures come out of this without a doubt. The higher it goes, the more likely that is to happen.”
Costello said he felt there was at least a moderate bubble in the oil market.
“The fundamentals, while not great, certainly wouldn’t suggest that it has to be this high, so it’s very surprising,” he said. “And we know what happened to diesel fuel Monday (the average on-highway price of a gallon rose 16.1 cents to $3.819 on March 11), and that’s because over 60 percent of the price of diesel is the price of crude oil. So if crude oil keeps going up, it doesn’t bode well for diesel fuel. This is the time of year we start to come out of winter and hopefully, we’ll see some relief (in diesel prices) sometime soon because the weather gets better and takes a little bit of pressure off the distillate market. But with crude oil remaining high, I don’t know how much relief we’re going to get anytime soon.”
At this point, Costello’s not sure what’s going to happen to the price of oil.
In the past 52 weeks, the price has ranged from $63.45 to over $109 a barrel.
“I would have thought it would have receded before ever doing this. I believe there is at least a moderate bubble in oil, really in all commodities,” Costello said. “The deal is, people see commodities as a good investment and they are driving up the price of them. And then you throw in any little news out of Nigeria, Venezuela, the Middle East and it just adds insult to injury.”
And, he said, as the dollar continues to weaken, that puts upward pressure on oil prices.
Costello noted that trucking companies are taking additional steps to counter the rising prices.
Some, he said, have lowered the governed speed on their trucks and others are adding auxiliary power units for idling time.
For further, in-depth coverage of diesel and oil prices, pick up a copy of the April 1-14 issue of The Trucker at your favorite truck stop.