April 2009, Work Truck - Feature
Medium-Duty Operating Costs Increase in 2008-CY
The biggest factor behind the spike in medium-duty operating costs was the increase in diesel prices, which jumped 32 percent from the then-historical high in 2007. Other factors included increased labor rates and higher taxes.
By Mike Antich
Key factors that influenced medium-duty truck operating costs in 2008 were the price of diesel, increased repair costs related to new truck technologies, higher labor rates, and decreased utilization. However, fuel was the primary driver behind higher operating costs in the 2008 calendar-year.
"Clearly, the biggest, most significant factor influencing operating costs in 2008 was the leap in diesel and gasoline pump prices," said Greg Stanford, senior business consultant for PHH Arval. "For the 2008 calendar-year, U.S. diesel averaged $3.87 per gallon and peaked at over $4.75 per gallon last July. This is despite never having been over $3.25 per gallon before November 2007. The result is that fuel operating costs alone rose by over 32 percent from historically high 2007 levels."
Fuel costs in the 2008 calendar-year averaged $0.387 per mile for typical Class 3 and 4 trucks and $0.48 per mile for Class 5 and 6 trucks.
"At peak diesel prices, these values topped $0.47 and $0.59," said Stanford. "Viewed another way, consider annual fuel costs for 25,000 miles and what might have been a budget for $3 per gallon fuel. Higher pump prices resulted in a budget overrun of $2,100 to $2,700 for each vehicle, depending on fuel economy."
These costs would have been even worse had fuel prices not collapsed last fall.
"At the beginning of spring 2009, diesel prices are near or even below $2 per gallon in some areas, almost half where they stood at this same time last year. Certainly this is welcome news from an operating cost standpoint, but it comes as a result of decreased business volumes associated with the economic slowdown," said Stanford.
According to PHH, for the remainder of 2009, pump prices may continue to rise and fall with the strength of the economy. "The March forecast from the Department of Energy for diesel fuel is $2.19 per gallon for 2009 and $2.51 per gallon in 2010. However, a return to robust economic conditions will likely bring a return of higher diesel prices as well," added Stanford.
Truck Operating Trends
In recent model-years, a variety of new technologies have been offered on medium-duty trucks. These devices are introducing new expenses. "This includes repair costs related to new truck technologies such as APUs, hybrid devices, more complex transmissions, and other electrical components not previously available on trucks," said Steve Byrd, fleet services manager for PHH Arval and a Certified Transportation Professional.
Other trends that will influence operating costs in 2009 and beyond are vehicle utilization, replacement tire costs, labor rates, and new environmental regulations.