Small and mid-sized trucking fleets are failing at an accelerated rate largely due to persistently high diesel prices.
FTR Transportation Intelligence reportedly reviewed data published by the Federal Motor Carrier Safety Administration (FMCSA), indicating fleet fails picked up speed in May and set a record in June. The increase in faltering freight hauling operations parallels the rise in diesel costs.
“June probably is the first month that we are seeing large numbers of carriers that might have failed after the two-week, $1.15 surge in diesel prices in March,” FTR Transportation Intelligence VP of Trucking Avery Vise reportedly said. “I would expect net revocations to remain high — and perhaps rise — for several more months at least.”
The price of diesel at the pump began to tick up during the winter of 2021 when fuel demand rose as the country emerged from the pandemic. The average price of diesel hovered around $3.70 per gallon in November 2021.
Following the Russia-Ukraine war, U.S. and European allies decided to ban the purchase of Russian oil, and the prices soared to record highs. Reports indicate the price of diesel shot up by 75.5 cents in a single week in March and the seemingly out-of-control diesel prices continued to spike.
The Energy Information Administration stopped publishing weekly diesel cost data on June 13 for more than three weeks as the price per gallon sat at a stunning $5.726, compared to $3.252 in 2021. The wing of the U.S. Department of Energy recently resumed posting data after the price of truck diesel began to decline.
“One development that could stem that tide might be a substantial and sustained decline in diesel prices. However, that’s complicated,” Vise reportedly said. “If diesel prices fell due to increased supply or an improved geopolitical situation, that would benefit small carriers. However, if diesel prices were to drop due to declining demand — i.e., less freight being hauled — we would see failures rise for reasons other than diesel prices.”
The FMCSA data indicates trucking “revocations” exceeded 6,300 in June and nearly 9,300 in May. Vise noted that June’s numbers are actually worse because the FMCSA information added in 4,000 enforcement-related revocations. June’s failures appear to be driven by market forces such as inflation and record-high diesel expenses.
Although fleet operation failures remain a troubling trend, there may be something of a silver lining for truckers. Almost 8,000 carriers jumped into the for-hire authorization ranks during June. While that number appears low compared to post-pandemic metrics, it ranks well above the monthly average of approximately 3,000 from 2015 through June 2020.
“While I believe we will continue to see the number of new carriers decline, I would not be surprised to see it remain higher than typical before the pandemic,” Vise reportedly said. “One issue is the shift from a leased owner-operator model to a brokerage model for surge capacity, and that shift will accelerate now that California can enforce AB5 on carriers. Indeed, I would not be surprised to see a spike in new carriers over the next several months for that reason.”
Sources:
https://www.fleetowner.com/news/article/21245948/june-fmcsa-data-shows-accelerated-fleet-failures
Leave a Comment