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Here we go again: I woke up this morning and fuel prices had climbed to over three dollars a gallon! In fact, the national average diesel price this morning was three dollars and twelve cents a gallon. It's probably going to be even higher when you're reading this.

Unrest in the Middle East, another large terrorist attack attempted and thwarted, problems with the Alaskan pipeline, and still higher worldwide demand for fuel. I don't have a crystal ball but it all points to escalating fuel prices in the near future Ð and the foreseeable future for that matter.

Sounds terrible doesn't it?
This sounds like a disaster. But wait a minute, if this is such bad news, why am I smiling? And no, I'm not smiling because I own shares in BP or Exxon. I'm smiling because like you I run trucks of my own and higher fuel prices are the best thing to happen for owner operators in years. Yes, you heard me right: high fuel prices are the best thing that has happened for owner operators in years.

Now let me qualify that statement. High fuel prices are great only if you really understand how to run your business. If you don't, this could be a disaster and it could very well put you out of business. Here's why it can be a great opportunity. Somebody is going to move the freight in this country.  They have to; it's not an option, and somebody is going to move the freight at a profit even if fuel is ten dollars a gallon. Again, it's not an option. In order for the freight to be delivered, shippers will have to pay fuel surcharges to match the higher fuel prices. The higher the fuel goes, the higher the surcharges go. Once you understand how surcharges work, you'll understand where the opportunity is.

ThatÕs what fuel surcharges are all about.  Rather than just constantly changing freight rates which sometimes are negotiated for long-term contracts, a surcharge scale is put in place to adjust for the fluctuating price of fuel. The basic premise is that a trucking company can make money on the current freight rates if fuel is around a dollar twenty-five a gallon and trucks average about six miles per gallon. So even though there is no one formula to set fuel surcharges, those are the averages most commonly used. Now no matter how high fuel prices go, the surcharge will climb with it, so that in effect a truck that gets six miles per gallon is only paying a dollar twenty-five for fuel.

So at todayÕs fuel price, your surcharge needs to be about thirty-one cents per gallon to keep your effective fuel price at a dollar twenty-five. That is if your truck is getting six miles to the gallon. If you are only getting five, then you would be paying a dollar fifty-seven for fuel. You would lose money every time fuel goes up. But if youÕre getting seven miles per gallon, your fuel price would only be ninety-five cents a gallon, and every time fuel goes up you make more money.

So rising fuel prices are the best thing to happen to owner operators in a long time, because an owner operator has much more control over fuel mileage than fleets do. There are dozens of ways to improve your fuel mileage and, with so much opportunity for profit, many are worth doing immediately. Having said that, be careful of fuel-saving scams and devices which do absolutely nothing. I've just finished my bookkeeping software for owner operators and it includes a fuel surcharge calculator. Call us for a free trial at 888-262-8585. "Be safe, be profitable, and master the journey."

Kevin Rutherford
The Rutherford Group
www.cmcseminars.com
trucktax@mac.com
888-CMC-8585
888-262-8585