Common Tragedies

Thoughts on Environmental Economics

Independent truckin’: are their chips cashed in?

Posted by Evan Herrnstadt on April 2, 2008

For all the talk I’ve heard about shipping costs going up with the price of fuel, I hadn’t really thought about the actual logistics of such a passthrough. In the trucking industry, it seems that owner-operators are paid by the mile, then expected to cover fuel and other costs. As diesel prices have shot up, independent drivers’ compensation has apparently not increased in kind, prompting a “loosely organized” informal slowdown/protest on major highways. Indeed, they have been footing the bill for the rest of us when it comes to rising fuel costs. From the Houston Chronicle:

“We can no longer haul their stuff for what they’re paying,” said David Santiago, 35, a trucker for the past 17 years. Santiago, like many of the more than 50 truckers gathered on a side street near the Port of Tampa, said he can’t support his family on what he makes. “If it wasn’t for my wife, we would have been bankrupt already,” he said.

Okay, understandable. So what can be done about it? Either companies are going to have to increase the price they pay independent operators, or fuel prices are going to have to decline somehow. Unfortunately, neither seems feasible at the moment:

Some other truckers, however, didn’t join the protests, saying they doubted a strike or mass demonstration would be effective because trucking companies are not on board and there is no central coordination.

“The oil company is the boss. What are we going to be able to do about it?” said Charles Rotenbarger, 49, a trucker from Columbus, Ohio, who was at a truck stop at Baldwin, Fla., about 20 miles west of Jacksonville. “The whole world economy is going to be controlled by the oil companies. There’s nothing we can do about it.”

Here we have a combination of collective action problems and lack of market power preventing the efficient passthrough of fuel costs to the consumer. The independent truckers apparently don’t have the coordination or sway to demand higher compensation as their costs go up. Marginal cost of supply went up, but market price isn’t rising in tandem as the oligopsonists hold it down.

So it looks like the only way to deal is to stabilize and even depress oil prices — that’ll stick it to the “boss”.

Some truckers, on CB radios and trucking Web sites, had called for a strike Tuesday to protest the high cost of diesel fuel, saying the action might pressure President Bush to stabilize prices by using the nation’s oil reserves.

It seems that America thinks the SPR can lower fuel prices, slice through marble, and strengthen your core in only 5 minutes a day for the low price of $99.99/barrel. No offense to Tony Little, Ron Popeil, and Byron Dorgan, but it probably can’t. Sadly, it’s a different world than it used to be, and the SPR just isn’t that big.

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