Winners and Losers: Oil’s Collapse is Truckers’ Gain

Going to roll the dice, step out of my lane and ponder this cyclical industry. Start with diesel, which could further succumb to Covid-19 and the crude oil crash.

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2/ This is from the American Transportation Research Institute’s Nov. 2019 report of trucking operational costs. My non-trucking mind guessed that fuel was a bigger proportion, but it’s still large:

Per mile, the industry had 2018 costs of $1.82, with fuel being 43 cents of it.

3/ Focus on 2018 as we put the current $2.51 diesel price in perspective. In recent years, I figure the fuel cost to a trucker was about 13-15% of the diesel price.

4/ Now revenues. Using the database from http://Dat.com , TCI reported that mid-March national average flatbed rates were $2.20 per mile, while refrigerated “reefer” rates were $2.11 per mile. Who knew there was another meaning of "reefer?"

These rates are declining.

5/ Now let’s shock the diesel price lower from the current $2.51/gallon. I stopped at $1.90/gallon, but who knows? Anyway, operating costs per mile collapse 5-9% in these scenarios, with even more if you go south of $1.90.

6/ Now compare pre-Covid volumes to now. Run a flat bed in 2018 for 91,506 miles (ATRI again), revenue of $2.20 per mile, with diesel >$3/gallon. Result: revenue minus operating costs = $34k…

7/ …Now drop the 91,506 pre-Covid miles to 75,000 miles. Also, drop flatbed rates to $1.70/mile (from $2.20) -- but let’s pay $2/gallon for diesel. Result: Revenue minus operating costs nets out to ~0…

8/ …which isn’t pretty, but not half bad to my non-trucking mind. The worst crisis in 90 years and this is the math on ~$2 diesel for a cyclical industry. Not too shabby.

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