Some western Kentucky commerce and shipping companies are feeling the squeeze of spiking fuel prices and inflation caused by the pandemic and more recently by the crude oil market disruptions created by the Russian war in Ukraine.
Data from the U.S. Energy Information Administration shows the nationwide average price of a gallon of diesel has surged by more than a dollar since the beginning of the year, up to $4.84 as of March 7. That can be a big deal for shipping companies that burn through massive amounts of fuel.
“It blows your budgets out of the water is what it does,” said David Gibbs, CEO of Paschall Truck Lines in Murray. “Fuel was our is our second largest expense, and fuel was always a variable.”
Paschall Truck Lines operates about 1,200 semi-trucks that travel across the country, shipping products for Proctor & Gamble, Walmart, the Home Depot and the Kellogg Company. Gibbs said his drivers purchase about 14 million gallons of diesel every year, so a dollar increase in price means a $14 million increase in expenses for his company. He said Paschall Truck Lines and other large trucking companies usually have agreements with corporations it ships for that cover around 70% of fuel price increases for trucking companies.
Those agreements can provide a cushion for shipping companies like his to weather price increases, with the most recent one being the “most extreme spike” he’s seen in his 40-year career in the shipping industry.
One local railroad is also seeing increased costs from spiking fuel prices. Compared to semi-trucks which tend to specialize in shipping consumer goods such as furniture, food and electronics, railroads tend to ship larger-scale commodities like coal and grain.
P&L Transportation CEO Tom Garrett said the about 20 trains on the Paducah & Louisville Railway use around 1 million gallons of fuel a week.
“We are more fuel efficient than the trucks. Of course, the increasing price does affect us, and, it's something that we have to pass through to our shippers,” Garrett said. “I think that the thing that people are surprised about the most is how international economics or politics so strongly affects a small company based in Paducah, Kentucky.”
He said P&L Transportation also owns the Appalachian & Ohio Railroad in West Virginia, which services a coal company owned by Ukrainians. Garrett said shipments of coal from that company on the railroad have stopped since the onset of the Russian invasion of Ukraine.
The U.S. Energy Information Administration states the cost of crude oil has influenced about 50% of the price of diesel since the start of the 21st century. Following the Russian invasion, crude oil futures spiked above $120 on March 7 but have since fallen to about $102.
