Lower fuel prices pressuring LTL margins and rates

Falling fuel prices may please motorists, but not necessarily motor carriers.

Lower diesel prices at the pump mean lower trucking fuel surcharges, and the loss of fuel surcharge revenue is cutting into the profit margins of less-than-truckload carriers.

LTL carriers could see operating income drop as much as 7 or 8 percent becuase of the reduction in fuel surcharge revenue, said Satish Jindel, president of SJ Consulting Group.


http://www.joc.com/trucking-logisti...ressuring-ltl-margins-and-rates_20150128.html

Jeff said:

Falling fuel prices may please motorists, but not necessarily motor carriers.

Lower diesel prices at the pump mean lower trucking fuel surcharges, and the loss of fuel surcharge revenue is cutting into the profit margins of less-than-truckload carriers.

LTL carriers could see operating income drop as much as 7 or 8 percent becuase of the reduction in fuel surcharge revenue, said Satish Jindel, president of SJ Consulting Group.


http://www.joc.com/trucking-logisti...ressuring-ltl-margins-and-rates_20150128.html

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I suspect there will be layoffs from this. Corporate america can not survive without that "survival on paper" look. Business have survived the ups and downs of the economy for years, but around 2007 (give or take a year or two) corporate greed ruined our jobs and is systematically destroying America.

I don't get it. This is probably a dumb question but how can the fuel surcharge legally produce a profit? How is it legally considered to be revenue? Isn't the surcharge supposed to be adjusted up or down along with fuel prices? If fuel costs the companies less then how are they losing money by lowering the surcharge? Where does the loss in profit play into a fuel surcharge unless companies are price gouging on the surcharge...........

Crystal said:

I don't get it. This is probably a dumb question but how can the fuel surcharge legally produce a profit? How is it legally considered to be revenue? Isn't the surcharge supposed to be adjusted up or down along with fuel prices? If fuel costs the companies less then how are they losing money by lowering the surcharge? Where does the loss in profit play into a fuel surcharge unless companies are price gouging on the surcharge...........

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Not so in corporate america. Anything....ANYTHING pertaining to money coming in for ca is considered profit. Back in 08 when the ltl's layed off people, they all jumped up and reported instant profits from employees who were let go. You can't really think they would let the fuel surcharge they have cherished for so long, simply vanish without recouping it from somewhere else....as in cutting drivers and putting more demand on the emloyees.

I wonder if those LTL companies that move those shipments by purchase transportation charges each shipment individually or do they divide it by the whole 53 footer ??

I already know the answer btw :)

Jeff said:

I wonder if those LTL companies that move those shipments by purchase transportation charges each shipment individually or do they divide it by the whole 53 footer ??

I already know the answer btw :)

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There again. Which ever looks better on paper.

Crystal said:

I don't get it. This is probably a dumb question but how can the fuel surcharge legally produce a profit? How is it legally considered to be revenue? Isn't the surcharge supposed to be adjusted up or down along with fuel prices? If fuel costs the companies less then how are they losing money by lowering the surcharge? Where does the loss in profit play into a fuel surcharge unless companies are price gouging on the surcharge...........

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It's not a "dumb question".... The surcharge was introduced when the price of Diesel began to escalate and was eating up a significant portion of revenue... and yes, it was supposed to rise or fall with the price of fuel on average over a given time-frame..... With that being the case the lower average cost of fuel should, in theory, offset the lower, or loss, of the "surcharge"... So why would the Carriers be crying they're "losing revenue"? Well for one, they no doubt count it as "revenue"... which it is because it is a set percentage based on the average cost of fuel that they add to the cost of a shipment..... One would logically think that as the cost of fuel declines.....it would offset the "lost revenue" from the surcharge... Perhaps one reason they are crying "loss" is so they can show "reduced profits" so they can avoid profit sharing...or possibly to head off demands of higher pay by Employees that might be eager to try and use lower fuel costs as leverage for a raise....
It is also possible that the surcharge added to each shipment on an LTL Carriers trailers was covering the whole cost of the fuel, rather than just a portion.... Which could be considered "gouging" the customers.... in my opinion..... and would explain why dropping fuel prices is "bad" for the Transportation Industry....
I'm not saying this is the reason...just speculating...