Record Diesel Prices Squeeze Small Carriers Just as Freight Turns

The national diesel benchmark has hit $5.967 a gallon, the highest on record, landing at precisely the moment the freight market was supposed to start rewarding the carriers who survived the downturn.

The timing is brutal. Van contract rates are running 18 per cent above last year and spot rates are up 35.6 per cent, the clearest evidence yet that the long freight recession has broken. But diesel is up nearly $1.87 a gallon year on year, and for small fleets the fuel line is swallowing the recovery before it reaches the balance sheet.

The exposure is uneven, and that is the political problem. Large carriers pass fuel costs through contractual surcharges negotiated with shippers. Owner-operators and small fleets, who make up the overwhelming majority of registered carriers, largely cannot. Uber Freight has warned that volatility at these levels could push operators to park trucks rather than run loads at a loss, which removes capacity from a market that has only just begun to tighten.

Shippers are already routing around the problem. Domestic intermodal volumes rose 12 per cent year on year across North America in July as freight moved to rail to escape the fuel exposure, though intermodal still accounts for just 5.9 per cent of long-haul traffic, limiting how much pressure it can absorb.

Less-than-truckload is quietly recovering. XPO reported August daily shipments up 5.7 per cent and Saia tonnage up 8.7 per cent, as shippers move smaller consignments more often to avoid carrying inventory risk into an uncertain fourth quarter.

The industry now faces an awkward paradox. Rates are rising, volumes are firming, and the carriers least able to absorb fuel costs may not last long enough to benefit from either.