Diesel Hits Record High, Driver Pay Up 50%

Fuel prices skyrocketing to a record $6.53 per gallon are placing a heavy financial strain on the freight industry, according to David Parker, founder and CEO of Covenant Logistics Group. Parker explained that while the company purchases approximately 45 million gallons of diesel annually, they can only recover around 80% of these fuel costs through fuel surcharges.

The remaining 20% of expenses, including idle time, out-of-route miles, and deadhead trips, effectively eliminate the profit margin that carriers once enjoyed on fuel. Beyond fuel costs, non-fuel operating expenses, such as driver pay, health insurance, liability insurance, and physical damage coverage, have surged between 40% and 50% since 2019, outpacing the limited rate increases the company has been able to implement.

Parker highlighted that tender rejections have risen to 13.74%, up from roughly 5.5% at the same point last year, indicating a still-tight market despite being below earlier peaks. Spot rates for trucking services sit around $3.50 per mile, an increase of 80 to 90 cents over the previous year. Parker noted that contract rates are surpassing spot rates, a positive sign, and anticipates continued rate increases throughout the fourth quarter.

However, he cautioned that additional regulatory expenses may further impact carrier profitability as the industry navigates new engine regulations and potential fines from environmental compliance.