Gas prices fluctuate by the day. This is nothing new, but the conflict between Ukraine and Russia has caused an exceptionally painful spike. The current average price per gallon in Los Angeles County is currently $5.52, with diesel averaging $5.85, but some stations are charging over $6 per gallon. Trucking companies feel the sting of elevated fuel prices more acutely than most. To fill up a 100-gallon diesel tank costs about $585. If you’re thinking “ouch,” so are we.
Gas prices look very different than they did in recent months. The average prices are up by 57 cents/gallon from just last month. It’s hard to believe that at this time last year, gas only cost $3.73 a gallon. Inflation is hardly a new dilemma, but now its effects are more pronounced than they have been in decades.
Shipping companies use something called “fuel surcharge.” A fuel surcharge is a flat rate that allows the cost of fuel to be incorporated into shipping rates in a fair manner and allows shippers to have a fixed fuel cost they can count. Fuel surcharge is an important part of us continuing to operate our business and is set by the Energy Information Administration (EIA) and updated weekly.
Rising Gas Prices May Lead to Rate Hikes Down the Line
Before you panic, BYX just updated our rates at the start of 2022, and we hope to keep them stable for some time. Still, we prefer to be transparent with our customers so they understand why price increases have to happen. It goes without saying that elevated gas prices make transporting goods more costly. The farther the pickup, the more the additional fuel expenses are felt.
The hike isn’t just felt by trucking companies. Every rung of the transportation ladder is effected, including cargo vessels and moving freight by air. Coupled with the existing supply chain crisis and materials shortage, the cost of everything is likely to increase, not just gas prices. Maintaining our fleet, from replacing tires to changing the oil, is more expensive than it was a year ago.
Still, we do our best to keep our prices stable. Changing fuel prices is a permanent part of the industry. When prices drop, logistics companies are temporarily more profitable. This helps us to weather price hikes, along with restructuring and strategizing to keep our trucks on the road and limit the impact felt by our customers. A fuel surcharge is a flat rate that allows the cost of fuel to be incorporated into shipping rates in a fair manner and allows shippers to have a fixed fuel cost they can count. Fuel surcharge is an important part of us continuing to operate our business and is set by the Energy Information Administration (EIA).
A Few Words of Wisdom
From one business owner to another, the fuel cost hike has taught us a thing or two. Firstly, If you need to raise your rates to stay afloat, do so. Losing customers is a possibility, but a few lost customers is much better than going under completely. If your low prices put you out of business, you can’t serve any customers at all.
Secondly, with prices as high as they are, efficiency is more important than ever. This is more important for trucking companies than those working in other fields, but efficiency is beneficial for us all. Examine how your business can cut costs by planning routes strategically, minimize energy usage and brainstorm ways your operation can be streamlined. It might not seem like much, but small changes add up.
Last but not least, customer loyalty is everything. As unpleasant as it is to raise prices, the customers who appreciate your services or products are probably more devoted to your business than you think. Most people would rather stick with a company they know and trust rather than gamble on someone new. Take care of your customers, and they’ll take care of you right back.
To those who have stood by us through these unprecedented times, know how much we appreciate you! For more tips on navigating the world of business in 2022, read our post about dealing with the supply chain crisis.
Note: All statistics mentioned are accurate at the time of publication. Figures are likely to change over time.
