COLUMBIA — You know gasoline prices are now about $3.50 a gallon. You might not know that diesel has topped $4 a gallon, and that affects the cost of almost everything you buy.
And it is really affecting companies that run trucks on diesel fuel.
Nazir Memic is the founder and president of Laser Transport LLC, which is based in Columbia. He started his company in 2005 and already has five trucks in his fleet. Memic said that when he started, his was a very profitable business.
“I have so many ideas,” Memic said. “I really love this business, so let’s say in the future I plan to build a company and make the employees happy. If this situation keeps up, then I don’t think I can do anything.”
Memic’s company has shipped products for the same companies for three years. Unfortunately, there isn’t much loyalty in this business.
“In the U.S., there are 5 million trucks on the road,” Memic said. “If I don’t give them a good deal, they will choose somebody else.”
“Other companies have thousands of trucks,” Memic added. “Big companies have more trucks and more business.”
Put simply, Memic cannot raise his prices for fear of losing his customers. As a result, his profit line is taking a serious hit.
“I’m making 50 percent less money from three years ago,” Memic said. “It’s simple. $1.60 three years ago; $4.20 today. I still have to pay for fuel. ”
Memic said that his trucks’ tanks range from 200 to 300 gallons, which cost more than $800 to fill up.
At this point, Memic doesn’t know what will happen to Laser Transport if prices aren’t reduced.
“I’ll be honest with you: With what I’m planning to do now, there’s no way I can handle this business if (gas prices) don’t go down. I have no idea what I can do.”
Diesel fuel is much cheaper to manufacture than regular gasoline but has recently climbed well ahead of regular in price. There are many possible explanations for the rise in price, which the Energy Information Administration has tried to address.
One reason is that diesel fuel is made with the same process as the fuel used to heat buildings, according to the Energy Information Administration. There has been an increased demand for that distillate, which is reflected in the price of diesel fuel.
There have also been several changes in the sulfur standards for diesel fuel. By June 1, 2006, 80 percent of the diesel fuel in the country had to be Ultra-Low Sulfur Diesel. By Dec. 1, 2010, all diesel must be the ultra-low grade.
The administration says that a combination of greater demand for diesel worldwide, new sulfur regulations, and a higher tax on diesel fuel have all contributed to diesel prices surpassing regular gasoline.
Darrel Harmon is a trucker from Michigan and has been on the road for more than 18 years. He is feeling the same effects that are being described at the corporate level.
“Gas prices affect what loads I pick and take,” said Harmon while filling up his rig at Love’s Travel Stop. “I work on a percentage, and if it don’t pay enough, it don’t go on my truck.”
Harmon said the diesel prices are also affecting his wages.
“Everything’s going up,” Harmon said. “I’ve got to spend more money on fuel; that means less money goes to my family.”
The freight trucking industry isn’t the only one being directly affected by the spike in diesel prices. Russell Scott, a managing partner at Enrich Construction, said his company is feeling the heat as well.
Enrich is a general contracting company. It offers services ranging from guttering and windows to building houses. They have been in business for 15 years and have 20 employees.
The crew at Enrich all drive diesel powered Ford F-250’s and F-350’s. Scott said that to send two trucks to a site, it would typically cost him $300 just to get them there.
But diesel prices aren’t his only worry. Enrich does a lot of roofing work, and those materials are now costing significantly more to buy.
“The gas prices aren’t only affecting people filling up with gas,” Scott said. “It’s affecting anyone with a petroleum product. Our prices on shingles have gone up 15 percent in the last month. They are expected to go up another 7 percent every three months until something gets done.”
Shingles are a mixture of asphalt, tar and petroleum. The rise in cost of supplies is causing a serious problem for contracting companies bidding on jobs.
“Two years ago, I could do a roof for $120 a square and make 30 percent on it,” Scott said. “Now, I gotta be $200 a square. Problem is there are so many people out of work right now, people are giving work away.”
Other products made from petroleum include asphalt, motor oil, tires, plastics and wax.
Even though the price of supplies continues to rise, Scott said he can’t raise the price of his work proportionally. As smaller contracting companies approach bankruptcy, they are more willing to do the work for less. Most of the time, those bids are so low that Enrich can’t compete.
“They’re going in underbidding all these jobs,” Scott said. “We have to get in line with them, so we can’t overprice or even be at a midrange price sometimes. The price of gas affects that because if we have to give any of our jobs away or price them to compete with some of these people who are starving, two or three extra tanks of gas really affects our bottom line.”
Nationally, trucking companies have lowered the speed they allow their trucks to drive in order to maximize gas mileage. Con-Way Freight, one of the country’s largest trucking companies, was the first. It lowered its trucks’ maximum speed from 65 mph to 62 mph. This idea has not been employed by Scott, Harmon or Memic, but all are entertaining cost-cutting methods of their own.
“Lots of people in our field are getting compact cars and fold-up ladders,” Scott said. “You could do that instead of putting a long ladder on the back of these big diesels.”
Scott has also considered switching to trucks that run on normal fuel, but he decided that wouldn’t save money either.
“Your pulling capacity goes down if you don’t have a diesel truck,” Scott said. “It’s going to take more gas to pull that truck up a hill than it would a powerful diesel.”
Memic fears that there might only be one option to save companies such as his.
“What happens to the body if you stop pumping blood?” he asked. “It dies.”
“And what happens to the country if the trucking stops?”
