Shipping and Logistics

ATA: Energy Crisis Threatens to Compound Supply-Chain Woes, Inflation

March 12, 2022

In a letter to the White House on Thursday, the American Trucking Associations called on the Biden administration to boost domestic energy production and take other steps to provide relief at the pump for truckers and other motorists. Fuel is the second largest operating expense for trucking fleets, and surging diesel prices threaten to decimate trucking capacity at a time when the supply chain is already under extreme stress, the trade association said.

oil barrell “We cannot let an energy crisis compound the supply-chain crisis, and we have the power and resources to prevent that from happening,” said ATA President and CEO Chris Spear.

The trucking industry moves 73% of the nation’s freight, or 10 billion tons of goods annually. Escalating fuel prices are driving up the transportation cost of all goods, adding yet another layer of inflationary pressure on every sector of the economy, ATA said.

The impact is particularly hard on the 97% of motor carriers that operate small fleets and do not have the scale to negotiate lower fuel prices. “Lacking the financial reserves to weather this storm, many of these companies are at risk of failing given current projections for global crude prices over the next 12 months. This would decimate U.S. trucking capacity, unleashing catastrophic consequences for a supply chain that’s already overstressed,” ATA stated in its letter.

Therefore, ATA calls on the administration to:

• Expedite onshore and offshore oil and natural gas permitting to spur expanded production;

• Initiate immediate lease sales in current production areas in the Central and Western Gulf of Mexico;

• Encourage expedited carbon capture and sequestration rulemaking to ensure that America remains the world’s leader in carbon reduction technology development;

• Work with both domestic and international oil and natural gas producing nations to help reduce global oil prices; and

• Consider timed releases from the Strategic Petroleum Reserve.

In 2019, commercial trucks consumed 46 billion gallons of diesel and gasoline. Motor carriers spent $112 billion on diesel fuel that year, when the annual cost of diesel ranged between $2.97 and $3.17 per gallon. As of March 7, the U.S. Department of Energy reported the national average diesel fuel price at $4.85 per gallon—the highest price in U.S. history. More than half the cost of a gallon of diesel fuel is attributed to the price of crude oil. Crude prices are now well over $100 per barrel, with forecasters predicting $185 per barrel by year’s end, ATA said.

“We cannot afford to ignore our nation’s current energy needs in a fog of partisan idealism about the future of energy use. The trucking industry supports an all-of-the-above approach when it comes to securing our energy future. But the transition to cleaner and renewable fuels over the horizon requires a practical, actionable bridge in the here-and-now, beginning with the abundant sources readily available at home,” Spear wrote.

By Tim Triplett, Tim@SteelMarketUpdate.com