Editorial: Fuel Prices on the Rise Once Again

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uel costs jumped sharply last week at retail pumps, while crude oil surged even more, a precursor to additional price hikes coming soon to a fueling station near you.

Once again, this major operating expense for trucking companies and freight shippers is on the rise. And just as before, consumers, too, are being hit with a cost they cannot avoid.

Only a week earlier in this space, we touted the good start to 2005, as trucking and its suppliers were surrounded by favorable omens for the pace of economic growth and the continuing robust demand for freight services.

Sales of big-rig trucks and other equipment used by fleets have been moving ahead at the strongest pace in years. An increasing number of truck lines are not only replacing old vehicles, but adding to their net fleet size — a sure sign that they see the freight market continuing to grow.

Last week, we got another such indicator when American Trucking Associations said its truck tonnage index rose a seasonally adjusted 3.4% in January to a record high, as the manufacturing sector’s output of goods and demand for inputs like steel kept trucks loaded.

Still, the latest news on fuel costs is worrisome. While many trucking firms now pass along fuel price increases through surcharges, many carriers report that surcharges do not recover those increases fully, and some say their freight customers still resist when surcharges keep moving higher.

But trucking executives routinely warn that the major problem with rising fuel costs goes beyond how any particular carrier manages its fuel bill or is able to adjust the costs with its shippers. The bigger worry is that an additional fuel “tax” on households will make consumers less willing to spend as freely on goods and services, thereby slowing overall spending. That, in turn, can take the shine off an economy that is generating more and more freight shipments.

Higher fuel prices are not the only thing that can slow things down. Steadily rising interest rates may already be cooling the economy. A weakening dollar in currency markets makes imports more costly, and since we import far more than we ship overseas, this also amounts to a “tax” on U.S. consumers.

But compared with motor fuel prices, these other factors take longer to work through the economy. Retail diesel again priced over $2 a gallon, gasoline climbing after only mild declines and crude back over $50 are warning signs. We hope the latest price surge was a temporary spike. But we all should be watchful.

This story appeared in the Feb. 28 print edition of Transport Topics. Subscribe today.