Opinion: Time for a Mandated Fuel Surcharge

By Bud Cuca, Nebraska Trucking Association

I talk to a lot of truckers every day. In Nebraska we have a great cross-section of carriers. We have huge ones, small ones, milk-haulers and gas-haulers. You name it and you’ll see it in Nebraska. With all my members there is one issue that is critical right now, and it is fuel. Our staff is consumed with trying to help our members deal with the fuel crisis and stay in business. After considerable consideration, it is my conclusion that there is but one solution to the crisis that is fair, would work for the long term and is in the best interest of our economy.

That solution is a limited form of federal intervention in trucking.

It pains my right-wing conservative heart to even make that suggestion. But there are certain immutable facts that make me think a fuel surcharge, mandated by the Surface Transportation Board, is right for trucking and right for the economy.

Within a few pennies, truckers of all sizes are buying fuel at the same cost. Fuel constitutes a major component of the expenses of all truckers. Small carriers make up a substantial portion of the distribution system and are a source of competition that makes trucking a bargain. Smaller carriers, particularly ones using brokers, cannot get surcharges. Bigger carriers spend enormous time and energy attempting to get surcharges, with mixed results. Without some long-term solution to the problems that are created by the volatility of the supply of crude oil, truckers lack the ability to survive for long. We need long-term solutions.

American Trucking Associations and my colleagues at various state trucking associations are to be applauded for their efforts in recent weeks to encourage release of the Strategic Petroleum Reserve, to encourage an investigation of price-gouging and to encourage a one-year reprieve from the diesel fuel tax. All are laudable notions. But they leave me short. They leave me short because they are short-term solutions to what will be a long-term problem.

My vision of a new federal regulatory scheme is fairly simple: The Surface Transportation Board establishes a baseline fuel cost in each of the Department of Energy’s Petroleum Acquisition Defense Districts — or PADDs, as they are known — based upon a moving price average. As the price of diesel at the pump goes up a nickel, for example, a penny-per-mile fuel surcharge automatically kicks in. Carriers must charge it and shippers must pay it. The surcharge must be passed on to the party that paid for the fuel. A formula could be drawn up to calculate the surcharge on inter-regional trips. The surcharge could easily be adjusted on a daily basis, if needed.

The notion may need some refining, but you get the concept.

Shipper and even certain carrier executives reading this are probably thinking of pointing missiles at the great State of Nebraska. But if they engage in some long-term thinking, the notion of a federal fuel surcharge ought to make sense. What makes trucking such a bargain right now is competition. But it is likely that, without some long-term relief, the supply of trucks will be dramatically reduced. In the long term, fewer trucks will be consolidated in few competitors. Freight rates will increase dramatically. Keep us in business and you’ll pay less over the long haul (pun intended).

Some will make the argument that they want freedom from regulation and allow the market place to dictate pricing. Under my vision, the marketplace will set pricing, with the exception of the highly volatile fuel markets. I would also argue that the industry is regulated now. The government tells us how, when and, to a certain degree, where truckers operate. My good friend Cliff Harvison of the National Tank Carriers Conference recently gave a speech in Houston that cogently made the argument that truckers are regulated and the notion of deregulation is a myth [“Some Trucking Customers ‘Just Don’t Get It’,” 4-3, p. 13]. He cited at least five federal agencies that apply requirements to the industry that drive the expense side of the price equation. Cliff is right on. We don’t have an unregulated, free market today in trucking.

Now is the time and fuel is the issue. It is time for truckers of all shapes, sizes and types to come together and fight for a long-term solution to a long-term problem that is not of our making.