Former Kansas governor Bill Graves estimates an additional $15 billion will be passed on to consumers from the trucking industry annually from as a result of higher fuel prices.
Mr. Graves, currently the CEP of the American Trucking Association estimates the amount based on the assumption that diesel and gasoline will average 30 cents more per gallon in 2012 than they did in 2011.
“We consume on average 50 billion gallons of diesel and gasoline each year, so just in terms of the hit on our companies and the cost we pass through to the consumers, that will be an additional $15 billion dollars a year we will have to pass on to consumers just to move our product.” he told CNBC’s Squawk Box.
Asked whether some of that amount would be absorbed rather than passed on, Graves said: “As I always like to say, we are not recreational drivers. We are going to try to pass on all of it.”
“In fact,” he continues, “everybody that ships product nowadays understands fuel surcharges, and they have become a common practice in our business.
Graves notes that, while there may be some lag in getting all shippers to go along with the surcharges, a reduced available capacity compared to the end of 2008 has empowered the trucking industry in terms of pricing: “The capacity that was there at the end of 2008 is simply no longer there. Those [trucking companies] who survived have a lot more pricing power and control to what loads they accept and what pricing they get for them.”
This, Graves says, means that all the extra cost is going to get passed on to the consumers in terms of raised prices on what they pick off of store shelves.
In addition to being a sector that is fueling some growth in the industry, through the moving of water on drilling sites, Graves notes that natural gas is what a lot of truckers are turning to in order to manage their increased cost.
“The delta difference between a traditional Class 8 diesel-[powered truck and a natural gas-powered truck is somewhere between $35 and $40 thousand dollars per unit.” says Graves, “so energy content being the same, truckers are looking to get those savings that apparently are available by going to natural gas.”
What do you think truckers? Would you drive a diesel powered by natural gas if it could save you money in the long run?