Diesel Prices Are Down, But What’s the Bigger Picture?

For trucking companies that have been watching their expenses like a hawk, the good news is that diesel prices have fallen by about half of what they were last May. However, lower prices at the pump may be a warning sign that trucking companies and owner-operators need to start building up their capital reserves.

Diesel Prices and Demand

Now that the United States has moved past the reports of price gouging that took place last year, fuel costs have been normalizing. While unleaded prices fell tremendously, diesel prices still remained relatively high. This year, wholesale diesel prices have dropped drastically from an average of $5.50 per gallon last May to roughly $2.65 per gallon. Looking beyond the price at the pump, we see that demand for diesel has dropped by about 8.5 percent in the same span of time. Major oil-producing countries overseas are drawing down the production of diesel, which logically should cause increases in prices and availability. If production is low and prices are low, then we have to look at industry demand. If demand for diesel is lower, what does that tell us about trends in the trucking industry?

Trucking Demand

Diesel is not just used by the trucking industry. Residential homes use diesel and kerosene for heating, and industrial factories use diesel for machinery. Winter was warmer than expected, and factory output for the past two quarters has been lower than expected. Taking out those two aspects, we can isolate trucking and see that the demand for on-hire trucks has also been decreasing. In fact, freight volume as a whole has been lower than forecasts projected last year. Financial projections at the start of 2023 were high, indicating a rebound for the trucking industry. These projections were countered by a lack of new construction in the private sector and less-than-encouraging retail sales at the start of the second quarter. In short, the outlook for the trucking industry is still uncertain, echoing back to the first half of 2019 when rates and demand were at all-time lows.

Cost-Saving Measures for Trucking Companies

When the economic outlook is uncertain, trucking companies need to simultaneously cut costs while building up capital reserves. Fortunately, there are a few ways they can kill two birds with one stone:

  • Cut fuel expenses: Even though fuel prices are down, there is no telling when they might rise again. Finding deals on wholesale purchases or additional discounts while drivers are on the road can turn into big overall savings, allowing carriers to put more capital into their reserves. Single Point Capital offers fuel programs that feature savings on wholesale purchases, as well as acceptance at over 7,000 locations nationwide.

  • Insurance: Insurance is one of the biggest expenditures in the trucking industry. Covering liability, damages, equipment, and drivers come with a big initial outlay. Single Point Capital offers insurance programs that not only offer great rates and coverage, but we offer deferred down payments for new trucking companies that can cut the initial cost by up to 50%, with the remaining balance spread out over weeks to prevent a strain on finances.

  • Freight Bill Factoring: When demand is low, it is important to catch up on any outstanding customer invoices. Single Point Capital will turn invoices into cash immediately and make funds available within a single day. This gives trucking companies and owner-operators the ability to cover overhead, make payroll, and stockpile capital in an uncertain economy. Our personal account managers are here to answer any questions and offer guidance.

  • Finding Loads to Haul: Small carriers and owner-operators need to find shipments with the best rates possible. Single Point Capital offers load boards and dispatching services to our clients, and we make sure to negotiate the top rates.

Whether you are starting your own company, positioning yourself for growth, or trying to cut costs and increase your cash flow, Single Point Capital is your one-stop shop for all of your trucking needs. From fuel and insurance to load boards and freight bill factoring, Single Point Capital offers customized solutions to help you reach your goals quickly and efficiently. To learn more about our services, reach out to our team today.