C. F. Lynch & Associates

We're Over a Barrel Here!

By Clifford F. Lynch

DC Velocity, June 2008

As the price of regular gasoline and diesel fuel passes the "psychological barrier" of $4.00 per gallon, itís clear that this is one issue we can no longer ignore. While diesel fuel prices have been a concern for motor carriers and independent truckers for some time, it has taken a little longer for the shock waves to reach the average motorist. But now with a sluggish economy and gas bills of $60 to $80 per tank, fuel prices have become a hotbutton issue for most American drivers.

As the price of diesel continues to climb, we can all expect to pay more for just about everything we use in our daily lives. According to the American Trucking Associations (ATA), the cost to fill an average tractor has increased by 116 percent or $615 over the past five years. Since trucks haul 70 percent of U.S. freight, this will have a direct impact on most consumers. In the meantime, many trucks are being taken out of service in an attempt to control costs. If that sounds like an extreme response, consider the dilemma of the owner-operator who must spend $1,200 to fill his tractor, then try to earn it back. The numbers just arenít adding up.

So what are our options? This being an election year, itís no surprise that all three candidates have weighted in. Sen. Obama says that Washington needs to stand up to the oil companies. Sens. Clinton and McCain have both proposed suspending the federal per-gallon tax of 18.4 cents on gasoline and 24.4 cents on diesel fuel for the summer. Critics of this idea are concerned about the drain on the Highway Trust Fund, which already is approaching a deficit position. And itís not clear that a fuel-tax holiday would offer drivers much relief anyway. The American Association of State Highway and Transportation Officials estimates it would save the average motorist a total of just $28.

In the meantime, Democrats and Republicans alike are calling for the Bush administration to halt deposits of oil into the Strategic Petroleum Reserve. The ATA wants to go even further. Not only is the group pushing for the cessation of deposits into the reserve, but it has also urged the president to release some of the oil in an effort to bring down prices.

The strategic Petroleum Reserve currently consists of about 701 million barrels of crude oil stored in salt caverns along the Gulf Coast. In 2000, President Clinton authorized a release of 30 million barrels in a trade with the oil companies, but the reserves are held primarily for emergencies such as a disruption of supply. While a release could provide some short-term relief, the recurring unrest in Venezuela, Nigeria, and the Middle East Ė three of our top five sources Ė suggests to me we should be very cautious in tapping our rainy day inventories.

Although it certainly wonít help in the short run, there is another solution that I believe holds enormous potential if we can get our act together: hybrid trucks. The auto makers have been selling hybrid passenger cars for several years now, but in my opinion, there has been inadequate attention paid to hybrid over-the-road trucks. So I was delighted to see an April 14, 2008, press release announcing that Peterbilt would exhibit a heavy-duty hybrid at the Truck World show in Toronto. The truck is being developed in conjunction with Eaton and Wal-Mart (which took delivery of a Peterbilt Class 8 prototype hybrid model last year) and will be available in 2010.

What we need now is government support and encouragement. Whether itís tax credits or some other type of incentive, we need to apply some serious resources to this development. Every time a shuttle blasts off for the space station, I reflect on the irony that our country can do that yet not have a fuel-efficient surface transportation system. Maybe we should run Wal-Mart for president.



List all publications

Return to Logistics Advice