Opinion: Trucking Arrives at a Turning Point
b>By Bill Graves
i>President and Chief Executive Officer
merican Trucking Associations
But in some respects, 2005 also marked a turning point for the trucking industry: Skyrocketing fuel prices, softer tonnage volumes during the summer, a decelerating economy and a driver shortage in the longhaul sector that is constraining capacity are limiting the true potential of our industry.
These key issues, which American Trucking Associations continues to confront, spell future problems for our industry.
ATA still expects the economy to grow at 3.5% this year and freight volumes to grow about 2.25% in 2005. But the industry’s outlook today is more uncertain than it was just six months ago.
ATA revised the industry’s projected fuel costs in early September after the Energy Information Administration increased its estimates for average fuel prices this year and 2006. For 2005, EIA raised its projected diesel fuel price average from $2.29 per gallon to $2.41 per gallon. Given that average, motor carriers will spend an unprecedented $85 billion on fuel this year, marking a $23 billion increase over 2004. And in 2006, EIA projects diesel will average $2.50 per gallon, making another year of increased fuel costs to the industry likely.
Fuel prices are not coming down.
The days of paying $1.50 per gallon for fuel are long gone. The industry cannot continue to eat these costs indefinitely. Continued rapid escalation in the price of diesel fuel will result in a higher number of motor carrier failures, lower capital investment and negative employment trends.
Yet a bigger worry is the indirect effect of higher fuel prices. We can expect today’s high fuel prices to slow consumer spending, ultimately translating into less freight for our industry.
ATA reported in September that monthly truck tonnage marked its third consecutive decline — just as U.S. consumer confidence, an indicator of consumer spending, fell to its lowest levels in two years.
Another hurdle for the industry to overcome is growing congestion. Since 1980, the U.S. economy and travel on the nation’s highways have both nearly doubled. Yet over the same period, the highway system has only been expanded by about 3%.
In many parts of the country, highways that once could be counted on to carry people and goods quickly and efficiently are choked with traffic — burning time and energy while costing the industry money.
Increased congestion hits trucking at a time when the economy is relying on more trucks to haul more goods. At the same time, driver demand is outpacing the number of drivers available for hire.
Trucking is projected to haul more than 13 billion tons of freight by 2016, compared with 9.8 billion tons in 2004. Yet most state transportation plans do not anticipate breaking with the current trend of limiting highway capacity expansion, which has caused the current congestion problems.
How will the industry deal with this increased freight tonnage? ATA projects that by 2016, 3.7 million Class 8 trucks will be operating on the nation’s highways, up from 2.7 million in 2004.
The effect these issues will have on the trucking industry depends in many respects upon the trucking industry itself. The actions and decisions that we make now will resonate for many years to come. As an industry, we must take a lead role in identifying systemic problems and work to fix them in a manner that will continue to improve safety on the highways. We have begun that process, but we have more to do.
ATA has called upon Congress to address the soaring fuel prices as part of ongoing efforts to limit the negative effects of energy prices on the trucking industry, and, ultimately, the national economy. We believe this can be done in part by increasing U.S. investment in refining capacity — and amending the Clean Air Act to restore a single national diesel fuel standard so as to limit the magnitude and duration of fuel price spikes.
For years, the United States has underinvested in refining capacity, even as oil refiners operated at 95% capacity. Meanwhile, the lack of a single national diesel fuel standard generates regional price disparities and heightens localized supply shortages and price spikes.
To deal with congestion, Congress can act to ensure that federal revenues generated from fees imposed on highway users are invested more effectively. Limited dollars currently are spread way too thin on projects that may not be critical. Approximately 25% of federal highway user revenue is diverted to nonhighway projects, such as transit systems, bicycle paths, museum restoration and other purposes. While surely important in the communities where they reside, it is clear that many of these projects have limited effects on the safety or efficiency of the transportation system. These resources could be more effectively invested in critical, yet neglected, highway projects.
These are the issues we know of today, and they will demand answers even as the issues of tomorrow begin to appear. Our freight transportation system is one of the finest in the world, in large part due to the efforts, innovations and leadership of the trucking industry. This year has been a mixed bag of successes and challenges for carriers. To ensure an environment that allows for more successes than challenges in the future, the ball is in our court. We must begin to plan and take action today.
ATA is a national trade association for the trucking industry. It has headquarters in Alexandria, Va., and affiliated associations in every state. ATA owns Transport Topics Publishing Group.
This opinion piece appears in the Oct. 17 print edition of Transport Topics. Subscribe today.
