Trucking industry sounding alarm over rising diesel prices

Rising fuel costs are hitting trucking companies across Atlantic Canada hard, with smaller carriers facing challenges as diesel prices continue to weigh on their bottom lines.

The executive director of the Atlantic Provinces Trucking Association says elevated diesel prices are driving up transportation costs throughout the supply chain, making it more expensive to move everything from groceries and building materials to manufactured goods.

“Every load of groceries, building materials, manufactured goods and other essential products consumers require needs fuel to reach its destination,” said Chris McKee. “When diesel prices climb, the cost of moving those products climbs with it.”

While diesel prices have eased slightly in recent weeks, McKee said they remain high enough to create significant financial strain for trucking companies.

Costs usually end up impacting the consumer

He estimates the cost of moving products by truck has more or less doubled for shippers compared to lower fuel-price periods. Those added transportation costs are often passed along the supply chain before ultimately reaching consumers.

Unlike many businesses that can scale back operations when expenses rise, trucking companies have little choice but to keep buying fuel.

“We simply can’t stop buying diesel waiting for prices to improve,” McKee said. “We have to fill our tanks every day to deliver the freight that keeps the economy moving.”

The impact of higher diesel prices is very hard on smaller carriers

McKee explained that many of the smaller carriers operate with tighter margins and less financial flexibility.

He said smaller trucking companies can face cash flow challenges because they often have to pay for fuel long before they receive payment for deliveries. As diesel costs rise, even contracts that appear profitable on paper can become difficult to sustain.

“A smaller company may have to pay for several tanks of diesel before it receives payment for those deliveries,” he said. “A profitable contract on paper can still create an immediate cash flow problem when the fuel bill rises sharply each week.”

While some carriers are able to offset rising costs through fuel surcharges or contract adjustments, McKee said those protections are not available to every company. Smaller operators often have less bargaining power when negotiating rates with customers and may be unable to recover the full increase in fuel costs.

“If a small company can’t recover enough of those increases, it may be forced to move freight at a loss,” he said.

Sustained losses could threaten the viability of some operators, particularly if high fuel prices continue.