Episode 7 This Week in Trucking Banner

Trucking’s ‘Bloodbath’ & Declining Diesel Prices | Ep 7

Gurvir and Caroline discuss freight market trends, diesel prices, as well as a reported decline in diesel prices, with the average weekly retail price dropping by 4.5 cents, as well as a discussion regarding Werner Enterprises’ statement on the end of the downcycle getting closer.

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Caroline: [00:00:00] Welcome to This Week in Trucking, the podcast that tells you what you need to know about the trucking market for the week in 30 minutes or less. We’ll talk about diesel prices, freight market updates, and the top stories for trucking business owners that you need to know. We’re also going to answer some questions from social media at the end. Hey Gurvir, how’s it going?

Gurvir: Going pretty well. How are you doing? How’s your week going?

Caroline: I’m good. I’m good. I’m excited to talk about trucking and for this week, especially given that diesel prices are still coming down over the last couple of weeks they’ve been coming down. So let’s get right into it.

Gurvir: awesome.

Caroline: Alright, so today’s national average diesel price is about 4. 00, so it’s 4. 006. That is down from yesterday, down from last week, down from last month, and down from a year ago. Diesel market is looking like it’s stabilizing after some potential rifts, more [00:01:00] geopolitical shenanigans that are happening in the Middle East, but it looks like things are stabilizing out and that we are seeing lower diesel prices overall. This is again always really good news for carriers because every cent that you can make back in savings. And fuel is, of course, the number one biggest variable expense when it comes to driving a truck. This is good news.

Gurvir: Yeah, good news. I think it’s the third consecutive week. I know sometimes, national averages are different across different sources and stuff. I know some are even saying that it’s under four dollars. That’s really good to see. Hopefully it continues coming down. I think this is something we talked about earlier this year as well.

That hey, we’re not expecting too many spikes this year. I think we saw an increase in the first few weeks, and then it kept on coming down, and hopefully it continues down. We’ll talk about the freight market which is, not doing well in April, but at least, these few cents help carriers, so hopefully it continues to come down.

Gurvir: I’d love to see [00:02:00] 350s, but I think that’s far fetched. Ha.

Yeah, if the rate per mile is not going up, at least we can expect diesel to come down, and I think that’s a big relief, so let’s see how far it comes down.

Caroline: Yeah, definitely. The top states with the highest average diesel prices are the same culprits as always. California, Washington, Pennsylvania, New York, and District of Columbia. No surprise there. five states with the lowest average diesel prices have changed a little bit. So number one is Colorado with 3.56, then Oklahoma 3. 57, Texas 3. 60, And South Dakota making the list this week with 3. 66 and Utah with 3. 66 as well. So those are the good states to go and fill up. Obviously Oklahoma, Texas, those are usually in that bottom five. And Colorado has stuck around for quite a few months now as one of the states with the lowest prices. the lowest. South Dakota and [00:03:00] Utah are not always on this list. So

Keep up with those diesel prices to know where you should be fueling.

Gurvir: yeah, and there’s two things happening in diesel market that I’ll touch base on before we move into freight market updates. One is that the future markets is actually showing weakness, and what that means is how much is someone willing to pay in the future for diesel? And that’s coming down, so that’s a good sign, which means people are willing to pay less for diesel in the future.

So that’s a really good sign. And I think the second thing is that there’s an easing of sanctions on Russian banks. And I think that might impact energy financing and just reduce overall uncertainties in the market. But yeah, I think those are two good things as well that are happening for the diesel prices.

Caroline: Definitely. And a lot of people were thinking that the price of crude oil was going to go up over 100 a barrel. And the price of crude oil is the number one factor that determines the price of diesel. So this was a big scare a couple weeks ago that we thought that the price of crude oil was going to [00:04:00] skyrocket.

And it really didn’t on Monday, it settled at 88 and 40 cents and it hasn’t gone much above that. So those are all things. good signs that we’re going to see some stability, at least for the next couple of weeks.

To us about the freight market because we’ve talked about fuel, which is cost, and now we need to go into revenue.

What are people making this week?

Gurvir: one last point on diesel sometimes as the crude price comes down, it takes some time to reflect those prices at the truck stop. So if you’re not seeing, obviously, prices don’t change immediately, even though truck stops change prices weekly, it takes some time for truck stop pricing to come down.

So you should see that in the next few weeks as well. You might feel like, hey man, crude oil is coming down, but the truck stop pricing is not changing. So it does take some time. For that to go into effect. Let’s review the freight market. April, um, January again. I think we talked about this.

January was a really, a good month compared to the past few months into 2023. We thought, hey, look, is there recovery [00:05:00] here? But ever since January, every month we’ve dipped. Drive in rates in January were 215. February were 206. March were 201. And in April, we’re at 199.

I was hoping that we could beat March but things like, it seems like things are still not recovering. Capacity hasn’t left at the pace that the industry hoped. I think there’s still some capacity. I think at one point in April there was And, there was actually more capacity being added, like net positive.

But let’s see how May turns out. I think overall April hasn’t been a good month. Flatbed is the only segment where rates have actually gone up. So in January we’re at 2248 a mile. In April we’re at 253. That’s all about a 5 cent increase. So the flatbed graph looks looks like it’s improving.

Flatbed dry cement. It’s not. And reefer is drive in as well. I think we’re at the lowest this year, at 2. 32 per mile. And in January reefer was at 2. 57. So not a good news in freight market. But, I think we’re nearing this [00:06:00] downturn cycle.

Caroline: Yeah let’s hope that’s the case. I don’t know why the two 15 to 2 0 6 drop doesn’t hurt as much as seeing a rate per mile below $2. The difference between and 1 cents and $1 99 cents is not as big as other drops, but it just hurts so much more

Caroline: It go below $2.

Gurvir: yeah. I think for a lot of people, I think 2 is like the operational cost of just running a truck. Again, these are averages like this also takes into account like a 100 mile run and also a 3, 000 mile run. But anyways, this is still a pretty good indicator from DAT.

Caroline: And maybe just a reminder, yeah, these are averages reported from DAT. This does not mean that this is the rate you should accept, nor is it the rate that you should expect. So those are what you expect to get and what you will accept are dependent on lots of different factors, not just this rate, right?

Caroline: [00:07:00] This isn’t talking about fate here. We are talking about things that there are a lot of things that are within our control and that just because the rate is down for a lot of people doesn’t mean that it’s down for everybody. and so there are things that you could do to improve your situation.

Gurvir: Produce season is here as well. Let’s see where May numbers stand and we’ll continue to give weekly updates of how May is starting out.

Caroline: Definitely. All right, let’s get into the top stories. So my choice was an analysis piece that came from Overdrive, Trucking’s bloodbath, did brokers or carriers take the biggest hit? Now, I know that a lot of carriers don’t tend to feel sorry for brokers when they’re not doing well but it was a really interesting piece.

It’s talking about how potentially carriers have actually been more resilient to the market’s downturn than [00:08:00] brokers have been. So if you’re talking about, we know that a lot of carriers have gone out of business and we know that a lot of capacity has left the market, but there still is a lot of capacity in the market.

And that’s why with volumes that are depressed since the height of the market in 2022, No, sorry. 2020 and 2021. That we are still seeing this compression of rates because of that, right? But if you look at the height of the carrier explosion, when lots of new people were entering the market, this was this happened in September 2022.

So that was the height of when people were entering. Brokers really weren’t too far behind that. They reached their peak in November of 2022, so slightly after. So it looks like brokerages followed the carrier explosion there. But in March of this year, they fell to [00:09:00] 27, 450. That represents a decrease of 12 percent in the broker population, which is a lot bigger than the fall in the carrier population as a percentage, which fell by 8.5 percent over the same period of time. period or a similar period. So this is interesting. More brokers, if you look at the percentage of the number of companies that we’re talking about, the number of or the percentage of brokers that have left is larger than the percentage of carriers that have left the market. And broker revenues also went down in 2023 over 2023 by about 15%. And this Sort of how do I say it? This represents a trend in the market where carriers on the whole have been able to figure out ways of surviving greater rates than brokerages have. So this is an interesting market trend and [00:10:00] I’m wondering if you have seen this same pattern anecdotally.

Gurvir: definitely. I think coming from a factoring company, we saw more brokerages go out of business last year. I think that was our highest category of losses. We saw a lot of losses. Brokers go out, especially the small and the medium sized ones. And generally I think that’s the, one of the learnings that I learned, that hey, when there’s a huge uptick, generally if carriers are being hurt, brokers are also being hurt.

I think there’s a general notion in the industry that carriers are on the one side and brokers are on the other side, and if one fails, the other one also, actually the other one does not fail, and they profit off of each other. But this shows to go that, hey, if the whole industry actually struggles if the carriers are not if the business model is not viable there, and the rates are shit it will eventually go into the brokers.

Think about a broker’s business you have to commit to a contract rate for the whole year and anything can happen in the spot market and in 21, 22 they were taking some losses. Now, post covid, their volumes went down drastically. [00:11:00] Revenues go down. So they struggle at just as much as well.

It just takes time for the problem to get to them. And I think carriers are also unique in some way. You have a lot of owner operators that are one, man business essentially, right? One person business and It’s easier to navigate things if you’re just one person. If you have few employees, you have a lot of overhead.

It’s harder to keep afloat, right? So I think that also goes to show that peers are able to better navigate if you’re especially just a single owner operator, right? But yeah, brokers are, are seeing sort of the effects of this as well. It just took a little bit time for them to see this.

And not too much time. I think it was just a few months apart. But last year we saw a lot of brokers just go out. I, it seems like the whole industry is getting a sort of a housecleaning not just the care use.

Caroline: Yeah, I think you’re right. people think of carriers and brokers pitted against each other. There’s a lot of ill will between them. That a lot in media is that they’re pieces of a chain. And brokers are just one of the pieces between carriers and [00:12:00] shippers. so they’re really part of the same system. And you’re right if things are doing poorly in the freight market for one person on the chain, then it’s going to do…

Gurvir: A hundred percent. I would say it is. Brokers are making, some brokers are making good money right now. If you look at the spread between a contract and a spot rate, it’s about 68, 69 cents, 70 cents. That means just on average again don’t apply this to your exact load, right? This is just an average.

A broker is making about 70 cents more. On, on your load. That’s what it means, right? Because spot market is shit and they’ve probably negotiated decent rates for the whole year, right? And by the way as the market gets better, that margin has to go down as well. That’s also one of the indicators.

The margin can’t be this high and that means the market is actually in, in, is in imbalance. So that, that, that margin has to go down for the market to reset. So it’s both, right? Yeah, so a lot of brokers, and I think we saw a lot of small and medium sized brokers go out last year. But, and there are some brokers as well that are making, decent money.

Caroline: Just like there are a lot of carriers that are making now.

Gurvir: Yeah, exactly. Especially the ones that have contract rates,

Totally. That makes sense.

Caroline: Just because it’s down for a lot of people doesn’t mean that it’s down for everybody.

Gurvir: Yeah. No, that makes a total sense. I’ll go into my story, which is, Warner Enterprises says, I think I bet this is what they’re thinking. The end of down cycle is getting closer.

So I do agree that it is getting closer. I think this downturn started in 22 2022. I think right around March of 2022 when we started seeing all of, the rates are coming down drastically. It’s been more than two years now. So almost, I think 20, I think we’re in the 26th month approximately of this downturn.

And what we have seen in the last two years is just capacity. Exits, right? Same thing on the brokerage side as well. But essentially and the broker exits doesn’t actually really affect the industry in terms of the equilibrium because they’re just third parties, right? But if there’s an overcapacity in carriers that really affects the supply and demand.

So what we’ve been seeing is like more and more carriers, exiting from the industry and they’re probably, everybody’s probably seeing this [00:14:00] around them, right? People have reduced trucks people that got into the industry at a really expensive time. Got out. I think the number was 80, 000 companies have left the industry last year.

So we’re obviously and definitely getting closer and closer. The hardest thing is to predict when will we officially get out of this hump, right? I think last week we said, I think the last May was the lowest point. And now we’re just staying around the same numbers.

We’re not seeing a huge change. But Warner is saying, yeah, we’re getting closer to the down, down cycle. Hopefully that’s sometimes this year. I think the number and the figures that I’ve heard is definitely going to be here in the next 12 months. But nobody knows exactly when, but the chances of it happening in the next 12 months is much, much higher.

Caroline: I feel like I heard that and a half months ago.

Gurvir: Yeah, and these are, and by the way,

Yeah, I think we’re definitely getting closer and closer. These are the hardest things to predict like exactly when will it end. And whoever has that information could make good money in various ways. But but we’re definitely getting closer and closer.

Let’s see at what point does it happen.

Caroline: Yep. [00:15:00] All right. We have some questions here from social media, things that we see people posting, and we’re going to respond to some of them. So first one comes from someone who posted on one of the groups that we’re a part of. Hi, I need your advice. I flipped my truck at Wyoming 180 east. I won’t mention the city here and we’ll blur that out, but he says it’s because of black ice.

The truck slipped and I couldn’t control it. I hit, I didn’t hit any other truck, but I got a ticket. How can I fight this ticket so that it won’t show up on my record? If you know of any attorney in this county in Wyoming, please pass me his contact. Also, do you think this ticket is legal? Is considered a speeding ticket or crash?

And will it show up on my record? Thanks in advance.

Gurvir: Yeah, so definitely, I think I love that he’s asking questions regarding this person cares about their driver’s their driving record. Which is [00:16:00] pretty big, right? And these things affect your insurance rates in the future. I’m not sure if this guy is a company driver or an owner operator, but regardless, I think you should always try to keep your driver record clean.

If you’re a company driver, it costs your company more to hire you if you have a bad record. And if you’re an owner operator, you’re definitely paying more for insurance. So this is a really good thing that every ticket or citation that you get, you should try to test it and see if there are ways to get out of it.

Definitely he needs to get legal advice and talk to an attorney. I don’t know the local laws or the state laws. Not sure which way this will go, but I think an attorney would be able to get a better information for this person. And I’m not really sure if it’s a speeding ticket or a crash.

I think it might come under crash. And definitely, find a way to get this removed. But an attorney would be able to offer better information on this.

Caroline: Yeah, definitely. The part about, is it going to show up on my driving record? So I’m curious to see, what is he worried about? Is he worried about his driving record? Or is he worried about his safety rating with the FMCSA? Or both? So if he’s [00:17:00] an owner operator, he needs to be concerned about both of those things.

The safety rating with the FMCSA. We just did an event last week about safety ratings. FMCSA, the CSA program’s basics with Deep Compliance with Sandeep Singh from Deep Compliance. And he gave us a ton of really good information all about this. So go check that out on the Bobtail YouTube channel. We have that recorded. But basically what I learned from that session was that It doesn’t actually matter. For the crash indicator that’s one of the seven basics of the CSA scoring methodology. And for the crash indicator, it doesn’t actually matter if another vehicle was involved or not.

What matters is if If an involved vehicle was towed. So if you flip over and your vehicle has to get towed away [00:18:00] from the scene, that is going to count as a crash. So that is going to show up, and that is going to be really tough for owner operators single truck operations, because typically if you’re a carrier that’s driving over a million miles a year, One crash in a year isn’t going to make so much of a difference on your scores.

But if you’re a one truck operation, one crash in one year, you’re not going to be going than, you’re not even going to hit close to a million miles in a year. And so that can really hurt your scores. And so if you don’t already have a good safety record for the last couple of years then a crash can really, Do some damage to your

Gurvir: Yep 

Caroline: so I think this could, he’s asking, is it a speeding ticket? Does it count as a crash? Is it, what’s happening here? I think the answer is probably both. If you’re getting your truck

Gurvir: Yeah. Yeah, and if you’re an owner operator I would focus on both of those things, getting your personal driver Record clear cleaned up and also [00:19:00] your safety scores. It just seems like because it’s you know, I’m looking at the image of the truck Definitely have to be towed.

Caroline: Yeah.

Gurvir: There’s no other way to get that thing out of there.

Caroline: Yeah, all this is to say to that this happened to you. That sucks. And you’re not alone in this. Lots of people have had accidents like this and bounced back from it. So the story isn’t over yet. And best of luck to this driver. Glad you were okay. That’s the number one important thing. Well enough to write that post. Thank God.

Gurvir: Yeah

Caroline: All right. We have another question here. Quick trucking question. Does anyone know how much it costs to get your portion plates? Is it easy to do yourself or should I use a third party provider to file for me? Also, the same 30 percent off. The third party provider said they would do our MC and DOT number and the total cost would be 695. Just trying to make sure we’re not getting played and there’s not a way to do it ourselves for [00:20:00] less. Like how people charge hundreds of dollars to file EIN when people can do that for themselves for free. what are your thoughts here? Gurvir, should pay someone to do this for you?

Gurvir: No, I think she answered this in the question as well. I would say, see trucking is a small business, it keeps, if you start, outsourcing everything, there’s no margin left, right? The margins are already very thin I think a good practice always is doing things on your own.

When I ran a trucking business, I would do my own IRP plates just go to the local MBA, DMV you walk in and they’ll just lay out everything for you, exactly what you need to do, right? Sure, it’ll take two, three hours, four hours to do but at least you’re getting the practice of doing things on your own and constantly you’re actually teaching yourself that, hey, this is something you have to figure out on your own.

Now certain things I totally get should be outsourced, I’m not saying you should be doing everything yourself, but these are some of the things that I think as a carrier you should definitely know and be aware of how things work. So definitely do the IRP yourself the cost varies a lot. So this is something that you’re going to have to check with your state.

I think in Maryland it costs [00:21:00] probably like 2, 000 on average to get your IRP plates. Other states, I think it varies. It’s been also a while since I’ve done the IRP plates, but definitely I would suggest doing this yourself. And yeah, don’t pay a third party provider. Even the MC and the DOT, it’s an easy application that you can do yourself and definitely do that yourself and save, 700.

Caroline: yeah. I would say, know yourself, too. If you know that you are not the kind of person that’s gonna be responsible and organized with paperwork, then, or you just know that you don’t have time to deal with it and it’s worth it to you, you can find a third party provider and the numbers work out and they make sense, then sure. Go ahead. But this industry generally being in the trucking industry requires a lot of discipline and organization and paperwork. So if that’s not your strong suit, find a business partner who it is their strong suit, or maybe this isn’t the best industry for you to get into [00:22:00] because trucking takes a lot of paperwork, particularly around compliance, safety. We talked about the seven basics earlier. All of that requires you to be super, super well organized. So if that, again, if that’s not your strong suit, find somebody who’s strong suit it is and get a business partner or maybe outsource it. I would say that 6. 95, it depends on what, I know there are a lot of services out there that help people get their MCs and DOTs.

Actually getting your DOT and MC numbered is not hard. What’s, the hard part is activating that, getting that activated, doing the BOC3 filing, getting your insurance, shopping around for a good insurance rate, and making sure that have the, that. squared away. That’s the more difficult part about that, but that’s not even that difficult, right? So I would say, okay, what does that actually include? Does it include just doing the application and getting those numbers? And then you have to figure out how to actually activate your authority or are they going to be reminding [00:23:00] you, helping you, guiding you, are they going to be really responsive?

Are they then including other things? Are they IRP for that same price? I think it just depends. 6. 95 doesn’t seem outrageous to me. But I do think you need to learn, you also need to know what paperwork goes in, into your business. She did say in another comment that the only reason that she’s asking and trying to figure out how to outsource this is because she runs two other businesses. She definitely, she might have more cash flow from those other businesses that can help. get this one started. It, it totally depends on your situation, but good question.

Gurvir: Great question. Alright, should we go into the last question?

Caroline: Let’s take it. All right. What fuel card and insurance do you recommend?

Gurvir: Oh, this is a good question. I’ll start with insurance first. Insurance so there’s two things. One is an agency that gives you the quote, and the other thing is the actual insurance providers. So those insurance providers are like Progressive, State Farm, Hartford, Travelers Century, Great West.

If you’re [00:24:00] getting a quote from Progressive, I would say try to, That progressive code is going to be really expensive. Progressive is known for giving new carriers codes, but it comes at a really high price. It’s at the low end of insurance companies. Highest end in terms of price.

So definitely if you’re getting a progressive code and your agent is saying, Hey man, I got a good progressive code. I would say shop, I mean your, You should only go with progressive if all the other insurance companies say no, right? So I think in terms of the insurance carriers Try to aim for like good insurance companies like Great West, Century, Travelers, Hartford, I think there’s OIDA Association that insures owner operators The agency that I recommend is Reliance Partners.

They’re one of the biggest insurance agencies for trucking companies. They have all of these carriers with them that they can provide quotes on. So I’d recommend to, to go to Reliance Partners for any insurance quotes. 

Caroline: Definitely. All right. Thanks, Gurvir, for joining me again for this week in trucking. I’ll see you next week.

Gurvir: Awesome. Bye.