Anyone who takes to the roads will pay increased costs due to a fuel tax increase. Retail shoppers are also set to feel the pinch. Image via wikipedia user Alfa117
Written by Edward Smith
After the recent fuel tax that began Nov. 1, trucking companies are seeing a deluge of costs that may be passed down to consumers this holiday season.
Senate Bill 1 recently added 12 cents per gallon of gasoline and 20 cents per gallon of diesel, which, for trucking companies facing a labor crunch and new federal rules regarding electronic logging devices, means a tighter bottom line.
While the jump would not put California in the highest bracket for fuel taxes, as Politifact California corrected Assemblyman Patterson (R-Fresno) as saying, it would move California from the seventh position to the second position, even beyond Hawaii and Washington. Pennsylvania is No. 1.
Dale Mendoza, the owner of Fresno-based Quali-T-Ruck Service, which runs 45 trucks throughout California, says that in his 50 years of business he has never seen a jump this high all at once.
“Monday the fuel was $3.19, Tuesday the fuel was $3.39 and today is $3.59,” Mendoza said. “It went up 40 cents in three days.”
Though the fuel tax was supposed to be only 20 cents for diesel, the Energy Information Agency reports that rates went up from $3.18 to $3.54 between Oct. 30 and Nov. 6.
To put that in perspective, before the cost increase, fuel ran about $8,000 to $10,000 a week for Mendoza. He imagines it is going to get to $12,000 to $14,000 a week.
“I’ve already talked to three customers this morning and we upped their rates as high as 15 percent — $120 or $115 a load. Basically, all that’s going to do is cover all of these new expenses we’re getting,” Mendoza said.
Tim Thomas, the owner at Visalia’s FW Trucking, which drives to and from Southern California as well as interstate lines, says that for his and many other trucking outfits, most of those charges are absorbed into fuel surcharges written into contracts.
The surcharge protects FW Trucking so that if fuel goes up, retailers holding contracts with trucking companies absorb the cost of higher fuel rates.
That means an additional $12,000 passed on to businesses for the 175,000 miles they ran for the first week of November.
“You won’t see it in stores until about the second week of December, when food prices are going up,” Thomas said.
Maricela Macedo, assistant manager at State Foods Supermarket — which has several stores in the Central Valley — figures that estimation is correct.
“It might take three weeks for prices to catch up down the road,” Macedo said.
This new fee also comes at a time when many trucking outfits are also feeling other significant pressures, limiting their ability to absorb higher costs.
On Dec. 18, most companies have to install electronic tracking devices (ELDs) onto their trucks that will replace old paper methods of logging miles and time on the road.
The problem with these ELDs is that, according to Mendoza, his drivers are shut off after driving for 14 hours. A lot of his runs to Los Angeles typically take about 12 to 13 hours, putting drivers right at the verge of hitting the limit.
“It’s going to knock our production down by 20-24 percent, so I’m going to have to buy a third more trucks and five more drivers,” Mendoza said.
This need for more drivers to fill a possible gap comes as his company is having difficulty finding drivers.
He’s raised wages $2 an hour just to stay competitive.
“What’s happening in the industry is they are so short of drivers, the competitors are basically stealing our good truck drivers,” Mendoza said.
For Thomas at FW Trucking, he was spending about $800 a week for each of his drivers last year. Now, he’s spending $1,100 a week.
Higher fuel costs do come with a trade-off, however — long-awaited road and highway repairs.
According to Angela DaPrato, public information officer for the California Department of Transportation, half of the maintenance funds will go to the state highway system.
After the first $200 million, which will go to assist projects in counties that raise their own funds, the money will be distributed just like the gas tax is now — according to population, the number of vehicles and the number of miles of county roads.
For Caltrans District 6, which cover Fresno, Kern, Tulare, Kings and Madera counties, 15 projects totaling $421 million have been accelerated in what Caltrans calls “fix-it-first” projects.
Money from the gas tax has not yet been collected, but because they can anticipate it, large rehabilitation projects for highways stretches like the one between Fresno and Madera that were slated to begin in 2019 are now being pushed a year ahead.
For Highway 99 in that region, it is looking like a June 2018 starting date, according to Sam Yniguez, public information officer for Caltrans District 6.
Improved roads do reduce costs for trucking industries, whose costs for shipping permeate through every industry at every level.
Poor road conditions put wear on parts and tires, and if the scale house catches worn parts, that counts against a company’s safety score, according to Thomas at FW Trucking, but many fear that the money will go into the general fund and never end up as pavement.
In addition to SB-1, there was a constitutional amendment, ACA-5, passed to supplement the estimated $54 billion in revenue over the next ten years that requires money go only to repair and maintenance.
Tim Thomas at FW Trucking, at least, feels that if the money does end up as pavement on the roads, the investment would be worthwhile.