America’s long-haul truckers were already struggling. Then came $5 diesel

New York — 

Jamie Hagen believed the Great Freight Recession was finally over.

Last year was a tough one for his South Dakota trucking company, Hell Bent Xpress. He was thinking about shutting down, his cash drained in the lean years that followed America’s post-pandemic shopping spree.

But he refinanced his equipment, wagering demand would pick up and freight rates would rise again. “We started seeing some real progress. There was a lot of hope,” he said.

Then the Iran war started.

Diesel, the largest day-to-day expense in trucking, has jumped 41% since the start of the war to a national average of nearly $5.38 a gallon. The rise in oil prices is rippling through the US economy. Gas prices have jumped for drivers and grocery bills may soon rise.

Small fleet owners like Hagen and independent owner-operator drivers are hit hardest by the oil spike in the for-hire trucking industry. They typically own their rigs, pay for fuel and maintenance and find freight on the volatile spot market, where shippers post one-off loads for carriers to transport.

Small truckers aren’t making money fast enough from these rates to cover their higher diesel costs.

Large carriers like JB Hunt and Schneider National are less exposed to the pressures he’s feeling.

They have long-term shipping contracts with fuel surcharge clauses that adjust automatically when diesel increases. Big carriers often run more fuel-efficient trucks than small operators and have sophisticated fuel hedging strategies.

Most small operators don’t get these fuel surcharges. Rates on the spot market are negotiated “all-in” without a carveout for fuel. Small operators are lucky to recover half of higher fuel costs in their rates, said Dean Croke, principal analyst at DAT Freight & Analytics.

“Small guys in spot market are really getting dumped on right now,” he said.

Truckers also often don’t get paid for months after hauling a load. Large carriers with working capital can manage, but it’s brutal for small operators facing thousands of dollars extra in fuel costs today.

“Cash flow is becoming our biggest issue,” Hagen said.

The pump hit $999.99 at a fuel stop this week when it shut off, short of a full tank for his orange 18-wheeler Mack truck. Truckers are usually paid by the mile, not the hour, and his costs have shot up twenty cents a mile since the war began — wiping out the five cents he usually earns.

“We were already on the very breaking point to begin with. This is like the nail in the coffin,” he said.

Boom-and-bust industry

The number of truckers on the road grows when demand is hot and shrinks as the economy cools.

Some 450,000 owner-operators currently haul long-distance freight by the truckload, estimates Stephen Burks, a former truck driver and economist at the University of Minnesota Morris who researches the industry.

Thousands of operators flooded into the market starting in 2021 to haul goods to Americans stuck at home and flush with pandemic stimulus checks. Most firms that sprang up to capitalize on the demand had fewer than five employees, Burks said.

Freight rates climbed nearly 40%, and business boomed.

“You couldn’t throw a stone without making a profit,” Hagen said.

But the market turned at the end of 2022. Consumer demand began to slip and rates started falling. The industry suddenly faced a different problem: too many truckers chasing a slowdown in freight. Many mid-sized carriers, small fleets and thousands of independent truckers all exited the industry.

Stagnant rates today still reflect oversupply from the post-pandemic boom.

The diesel shock could force some truckers to park their rigs — lifting rates for operators left standing.

Christopher Lloyd, a longtime truck driver in Richmond, Virginia, is trying to hold on.

He became an independent owner-operator in 2024 after years of driving for different companies. He spent $187,000 on a new flatbed truck.

“I got into this to own and control the terms of my career and the direction of the business,” he said.

He’s adapting to the diesel price increasing by tightening his “fuel strategy” and filling up at stops where diesel is cheapest. He’s skipping $130 truck washes, pressing freight brokers to add extra money to loads and rejecting unprofitable jobs in New England.

“The shippers up there are still clinging to old prices,” he said.

He has witnessed trucking go from “a ticket to the middle class to slowly creeping its way to an economic backwater” during his career. Rates, driver pay and benefits have all been driven down since federal deregulation of the industry during the 1970s and 1980s.

But he has no plans to leave. He’s a lifer.

“As long as I can still feed myself and keep the lights on, I’m hanging on.”