Don't feel sorry for that truck driver so fast.
If you listen to the radio or watch some TV there is no doubt you have heard comments about “how can truck drivers make it paying $5.00 per gallon for diesel?” Well I'm going to tell how they can make it. I'm going to share how the majority make money off fuel prices and why those who don't deserve to go out of business.
Frankly, I'm upset that the prices have gone down. While the lower prices have helped me with my home budget, lower prices have cost me thousands on the business budget. Why does it hurt the home budget? Because there is nothing you have that hasn't had a ride on a truck and delivery expense is part of a stores price structure.
Freight is booked months in advance. Freight brokers go into where your favorite item is produced and make agreements to move X number of loads over a stated period of time and a given rate. But how do you figure the price of fuel weeks or months in advance? By adding a fuel surcharge, FSC.
One of the standard, and they differ, ways of figuring the FSC is to figure that they want the average fleet truck to pay $1.26 per gallon of fuel. The average fleet truck get 6 MPG so at the target price of $1.26 per gallon it would cost me about 21 cents per mile for fuel to drive the truck.
Every week the Department of Energy publishes the average national fuel price. Let's, to make things easy, say that the current price is $4.80 per gallon. At that price it costs me 80 cents per mile to drive the truck. Therefore I would get my contracted rate for hauling the freight plus an additional 59 cents per mile to offset the high cost of fuel (80 – 21= 59).
But what happens if I run my business right? I drive an aerodynamic truck. I've slowed down to 55 MPH. I keep my tires inflated, and yes it really does matter in a semi, and my fuel mileage is 7.5 miles per gallon. Doesn't sound like much does it. Well let's look at the numbers.
After FSC my net cost at 6 MPG will always be $1.26 per gallon. However at 7.5 MPG my cost per gallon drops to just 38 cents per gallon! If the price of fuel drops to $3.80 per gallon my cost at 6 MPG will still be $1.26 per gallon. Remember the formula will always set the cost to that in the average truck. But I'm better than average. But the decrease in fuel price decreases the FSC to 42 cents per mile which raised my cost of fuel to 63 cents per mile. So higher fuel prices are good for me. Who couldn't afford to pay 38 cents per gallon for fuel.
So why are truckers complaining and going out of business? Because the math that is good for me gets really bad for those who will not change. When you see the truck zip past you at 70+ MPH or one that is not aerodynamic with the giant chrome bumper and big flat front end remember he is only getting 5 MPH which is worse than the average fleet truck. What is his cost of fuel?
At the first pump price of $4.80 where I pay 38 cents per gallon, the non-aerodynamic speeder is paying $1.85 per gallon. If the price drops it gets better for him. At $3.80 per gallon his cost per mile is better but it is still $1.68 while mine is 63 cents.
I hope I didn't confuse you with all that math. Let's just bottom line it. We will drive 125,000 miles per year. He is getting 5 mile per gallon and at $4.80 per gallon his net fuel cost is $46,250 while mine is only $6,250.
So I ask you, if I paid you $40,000 per year extra would you drive 55 MPH and drive an ugly car?
So when you see that trucker racing by you, he is on his way to the poor house, but don't cry for him.
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blucey
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Black Boots
snarkychaser
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Christine Macdonald
Salon.com
Comments
Illinois plate registrants for 2008 declined by 25,000 trucks, while other neighboring states registrants have gone up. These carriers are fed up with the state trying to close their budget gaps on the backs of this industry and their leaving.
Are you aware that they also pay a fuel use tax? I see you enjoy math. Every quarter a trucker is required to report to the state of registration his total miles traveled that quarter, total number of miles he drove in each state, total gallons of fuel purchased and total number of gallons he purchased in each state. They then do the math to get the average mile per gallon lets say the mpg turns out to be 6. Then the fun part, each state is tallied by the miles driven in that state. For instance you drive 1500 miles in Wisconsin so 1500 divided by 6 is 250. So the way the state looks at it you should have bought 250 gallons of fuel in their state. If you didnt buy 250 gallons of fuel you pay the tax on the difference. Example: Used 250 gallons - purchased 160 gallons = 90 gallons that you owe the tax on which in Wisconsin the current rate is $.329 so you would owe Wisconsin an additional $29.61. You do the same math for every state you travel through. If theres a deficit in one state there must be a surplus in another state right? Well yeah but the surplus is usually in the state that sells the cheapest fuel by cutting their tax at the pump and then tacking it on at the end of the quarter as a SURCHARGE. Sound familiar? In the case of Indiana they currently charge $.16 at the pump so carriers jump the border to by fuel. But, when they have to file the form they have to pay a surcharge of $.11 on every gallon used on Indiana's highways. So it usually works out that even though you have a surplus of 1000 gallons in IN which would give you a $160.00 credit then you apply the surcharge of $.11 per gallon used and your credit is pretty much gone. But with the tax rates going up every 3 months in every other state you can still save money by purchasing fuel in states with a lower tax rate. California currently has the highest rate of $.437 with Illinois 2nd at $.434 the lowest rate is in Oklahoma $.13 with no surcharge. In 1st 2008 IL rate was $.375 and CA was $.366 OK $.13. Kentucky charges an additional "Weight Distance Fee" some states even require truckers to pay property taxes based on the revenue generated on their property!? This is creative taxation - and it all comes back to the consumer! I don't advocate crying for anybody but myself when I want to buy a food or clothes for my kids!
People should be mad as hell about all of this!
Where is all of this money going?
If I dont make enough money to pay my bills I: cut the wants, reduce the needs and redo my budget based on what I have coming in! I cant go to my boss quarterly or yearly and tell him I made some bad spending decisions last year and youll have to pay me more!
The reason carriers are going out of business is a combination of all of the above costs. The fuel cost would not hurt so much if the states could curtail there spending and stop raising the taxes and fees. How long will it takes us to figure out that the government is not capable of taking care of everyone? How long before "We the People" get outraged and come together to change things? How many more jobs have to be lost to other countries?
This is not just a problem in the transportation industry, its in every industry. Courtesy of Uncle Sam.