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Slow burn over rising diesel

Trucking firms lose money thanks to winter adjustment

Stuart Gradon / Postmedia News Archives
Diesel retails for 131.9 cents per litre.

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Stuart Gradon / Postmedia News Archives Diesel retails for 131.9 cents per litre. (CNS)

Burning diesel on Manitoba roads this winter means burning through more money.

The price of diesel fuel, traditionally cheaper than gasoline, has risen sharply since the end of summer, with the current price 25 cents more than regular gas.

In August, the price of diesel in Manitoba was 121.5 cents per litre, around seven cents cheaper than regular gasoline (128.9 cents per litre). This week, diesel fuel sells for 131.9 cents per litre at a number of gas stations around Winnipeg. Compare that to the 105.9 cents per litre found at the regular pumps and it's easy to see why some diesel users are fuming.

"In my recollection, and I go back over 40 years, that's the highest difference it's ever been," said Bob Dolyniuk, executive director of the Manitoba Trucking Association.

Diesel costs rise as the mercury drops because a thinner blend is introduced in colder temperatures. The reality is, the cost of diesel -- both at a retail level and wholesale (rack) price -- fluctuates as regular gasoline would, with industry influences (international conflict, low barrel numbers) determining the increase in price and setting the demand accordingly.

"What are you going to do? The trucking industry has to buy fuel," Dolyniuk said. "There's no alternative and bio-diesel hasn't yet turned out to be the silver bullet many thought it would be. We're at the whim of others."

Most trucking companies apply a fuel surcharge to their invoices, a formula taken off historical records and accelerated into current expenses for transport. Even with that calculation made, Dolyniuk feels the price of diesel affects the overall cost, noting some rates for transport are still too aggressive in relation to the competition.

"It's concerning because the reality is, one way or another you and I -- the consumers -- are going to pay the extra freight," he said.

"Regardless of what's going on today, ultimately, trucking companies have to charge enough to cover their costs and give themselves something of a margin, or there's not going to be a trucking company around.

"Eventually, the market will correct itself: some companies aggressive in their rates will find they'll have to come back down as business dictates. But as the cost of fuel goes up, the cost of transporting goods will go up, as well, and we'll pay for that cost."

And this simple economics lesson is where the bump in diesel cost affects not just those with big trucks, but everyone.

For example: if the high price of diesel means an extra $100 of shipping expense for a trucking company to haul cauliflower from a greenhouse in California up to a supermarket in Manitoba, eventually that $100 has to be made up in a price-per-pound increase or a similar additional incremental cost.

Multiply those nickels and dimes across the multitude of products that are shipped on the highway -- the MTA says 95 per cent of goods that move within Manitoba depend on trucks; an industry that directly and indirectly contributes $1.47 billion to Manitoba's gross domestic product -- and Dolyniuk says that's where the real diesel burn comes.

"That's where the cost of higher (diesel fuel) prices adds up," he said.

adam.wazny@freepress.mb.ca

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Updated on Wednesday, December 18, 2013 at 6:56 AM CST:
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