Please ensure Javascript is enabled for purposes of website accessibility Unusual Circumstances Drive Up the Cost of Trucking

Unusual Circumstances Drive Up the Cost of Trucking

By September 8, 2022September 14th, 2022Trucking Information

The cost of trucking has risen considerably over the past two years, according to a recent report from The American Transportation Research Institute (ATRI). The data showed that the cost of trucking in 2021 alone rose to an average of $1.85 per mile. There are many causes for this increase, and analysts are trying to discern whether these are ongoing trends, or if they can be categorized as unusual circumstances. While some items on the list, such as pay increases for drivers, can be clearly categorized, topics such as fuel prices, spot rates, and more are more complex, with multiple underlying causes that make the short-term outlook for the trucking industry uncertain at best.

The Driver Shortage

The driver shortage is an ongoing discussion in the trucking industry. On one side, there are experts who say having a slight driver shortage is good, because it is indicative of a healthy demand for goods. After all, a driver surplus would mean demand was low, and would lead to lay-offs and low rates. On the other hand, analysts show that the driver shortage has been growing, and the largest pain point has been retention. The driver shortage is not an unusual circumstance, but it is leading to unusual solutions, such as higher wages and recruiting from demographics such as women, minorities, veterans, and immigrants to fill vacancies. If driver retention continues to stay in the spotlight, expect carriers to get more creative when offering new drivers incentives to stay on board.

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Fuel Prices

Fuel prices have been on a roller coaster ride since 2020. The pandemic caused plants in Texas and Saudi Arabia to decrease production. At the same time, wealthy investors pulled money out of petroleum because no one was traveling due to lockdowns and remote work. Once the vaccine was made available and people were getting back to work, investors pumped money into the oil and gas sector, which contributed to rising prices, causing the huge spike the trucking industry witnessed in June and July. However, once everyone realized the high prices were causing the economy to stagnate, prices sharply dropped. This showed the trucking industry that relying on diesel is financially unsound, moving more carriers to invest in EVs and even hydrogen vehicles.

Spot Rates

Spot rates did fairly well from 2020 until mid-2022. Oddly, supply chain issues did little to deter demand, giving carriers and owner-operators more leverage in negotiating rates. Since June and July, spot rates have started to come down. The reason for this is that the price of goods has gone up and consumers are tempering their purchases in light of rising costs, which is lowering demand for shipments. This may change as we head into the fourth quarter, or it may mean lower year-end gains for the trucking industry.

Cash Flow

All of the above has led carriers to raise cash flow concerns as they look ahead to 2023. Waiting on unpaid customer invoices when there are ongoing expenses and overhead places a severe strain on cash flow. To get in front of any additional “unusual circumstances,” trucking companies and owner-operators use freight bill factoring. Instead of waiting on customers to pay invoices with terms of 30, 60, or 90 days, freight bill factoring converts unpaid receivables into cash so carriers can cover overhead, make payroll, and any other expenses. Additionally, freight bill factoring allows carriers to build up capital reserves, which can be used to weather economic dips or to roll out plans for growth. Up or down, freight bill factoring maximizes cash flow to give carriers the financial cushion they need to stay ahead of unusual circumstances.

Getting the Most from Your Invoices

Single Point Capital is a national leader in freight bill factoring. We work with carriers of every size, as well as owner-operators to turn their unpaid receivables into cash. We make funds available within 24 hours and accelerate cash flow so trucking companies can thrive and grow. Our freight bill factoring solutions help trucking companies and owner-operators in every economic climate. We even have a new app to help carriers boost their cash flow on the go. To learn more, contact the team at Single Point Capital today.

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