High diesel prices pressure Georgia’s trucking industry

Diesel fuel prices, which hit a record high in September, are putting pressure on Georgia’s trucking industry, an essential economic engine that moves goods across the state and country.

“Truck drivers are going through a lot right now,” said Larry Cothran, a Cartersville resident and owner-operator who has worked nearly 20 years in the industry.

The average price for diesel fuel in metro Atlanta was $5.88 per gallon Monday, down from a record high of $6.39 per gallon on Sept. 23, according to AAA data. A recent suspension of the state’s fuel taxes has curbed prices some, but it’s not a long-term solution.

The price of diesel is up 65% from a year ago, a result of wars in Iran and Ukraine that have disrupted global oil refining capacity.

Cothran, who hauls electrical equipment, said Friday he recently put $950 of diesel into his truck, when the same amount of fuel cost about $550 a year ago. He has fuel surcharges built into his customer contracts to recoup the extra cost, but not all drivers do, he said.

“It’s heavy out there for a lot of people who don’t have contracts, who don’t know how to negotiate, or who just got on and they’re learning how to be an owner-operator,” said Cothran, who chronicles his work as a trucker on Instagram.

The high diesel prices come amid a freight recession that started after the COVID-19 pandemic, said Seth Millican, president and CEO of the Georgia Trucking Association.

“Rates have been down. Costs have been up significantly,” he said. “And so this fuel price issue is not happening in a vacuum. It’s coming on the heels of a couple of really tough years in the trucking industry.”

Georgia has roughly 75,000 professional truck drivers, Millican said, and the industry is dominated by small businesses, with about 90% of registered motor carriers in the state running 10 trucks or fewer.

Larger carriers typically have fuel surcharges baked into customer contracts, said Chris Arnone, partner and vice chair of accounting and advisory firm Moore Colson, who has multiple clients in the trucking industry.

“They still have to continue to be nimble around which routes they’re traveling,” Arnone said. “Are they profitable? Do they have something on the truck both ways, to and from? Otherwise, it will be a margin hit for them as well.”

Trucking companies that lack contracts with fuel surcharges or have less negotiating power are most vulnerable to soaring diesel prices, experts said.

“It’ll really hurt the smaller guys,” said Kyle Behnke, CEO and co-founder of FuelSource, which provides mobile fuel to metro Atlanta companies. “They don’t have a big enough operation to be able to get bigger customers that’ll offer fuel surcharges.”

Cothran said if high fuel prices persist, he expects some of his owner-operator peers to shut down their trucks, opt to go work for a company or find another line of work.

“I think we’ll see some change,” he said.

Millican said he’s starting to see smaller trucking companies go out of business. “There’s a direct economic impact on those smaller carriers when they run into this type of situation,” he said.

More than 80 trucking companies across the country have filed for bankruptcy this year, according to Store Closure Watch, a website run by data intelligence company Four Lights Analytics.

That includes three companies in Georgia, Michael Madden, founder of Four Lights Analytics, said in an email to The Atlanta Journal-Constitution. However, he said none of the bankruptcy filings the firm has tracked cite diesel prices as a cause.

Higher diesel prices also means higher transportation costs for many goods at a time when inflation remains hot.

Arnone, with Moore Colson, said those costs will likely trickle through the supply chain. “I think ultimately this leads to higher prices for the consumer,” he said.

Elevated gasoline prices have already hit the pocketbooks of Georgia drivers to the tune of nearly $2 billion extra since the war in Iran began, according to Brown University.

Politicians now are taking measures to help curb fuel prices.

Georgia Gov. Brian Kemp last week suspended Georgia’s motor fuel tax for 30 days. This saves motorists 33.3 cents per gallon for gasoline and 37.3 cents per gallon for diesel.

The governor also suspended state weight limits on commercial vehicles, which a news release said would “further reduce the cost factored into everyday goods like those bought in grocery stores.”

Georgia gubernatorial candidates Keisha Lance Bottoms and Rick Jackson, are pitching tax cuts to reduce household costs as fuel prices rise.

The Group of Seven major economies also agreed to release up to 100 million emergency barrels of diesel and crude oil, according to media reports Friday.