Partners in Business: Controlling fuel costs

Bad driving habits – such as regularly running too fast, above your engine’s fuel-efficiency sweet spot – are among the primary reasons for increased fuel consumption and reduced profit.Bad driving habits – such as regularly running too fast, above your engine’s fuel-efficiency sweet spot – are among the primary reasons for increased fuel consumption and reduced profit.

Much attention is given to cost control when, in reality, “waste control” is what owner-operators should be watching. This is especially true for fuel, an owner-operator’s number one cost. You can make the wisest business decisions about fuel when you know your fuel economy, expressed in miles per gallon, and your fuel cost per mile (CPM).

Calculate your mpg simply by tracking your mileage between fill-ups and dividing the total by the number of gallons you burned. Do this for all trips. Fuel economy constantly changes, affected by weather, loads, routes, traffic, terrain, road surfaces and other factors. Many may be out of your control, but no problem can be remedied if it isn’t noticed.

It’s helpful to know mpg per month, per week and even per load. That occasional haul of steel across the Appalachians may be costing you more in fuel than it’s worth. If your numbers look bad, don’t give up; the worse your fuel economy, the more you have to gain by improving it.

Armed with your mpg, calculating your CPM is easy. Suppose your truck gets 6 mpg, and you ran 6,000 miles in a month, meaning you burned 1,000 gallons (6,000 divided by 6). If diesel averaged $3 per gallon that month, your total cost was 1,000 x $3, or $3,000. Your fuel CPM was $3,000 divided by 6,000, or 50 cents – likely the largest single chunk of your total CPM. It will pay you huge dividends to consider strategies for cutting your fuel bill.

For good fuel economy, your truck has to overcome three things: rolling resistance, air resistance and gravity. Fortunately, your driving technique and other choices you make can address each of these. Let’s look first at two of the biggest areas for cutting fuel costs.

THE POWER OF 2

Improving fuel economy will yield substantial savings. Here’s an example of savings achieved by improving by 2 mpg, not an impossible prospect with today’s technology. Figure diesel at $2.75 per gallon, close to 2015’s average price, and at $5, which was close to the peak price in 2008. Assume 120,000 miles per year.

pib-fuel

REDUCE AVERAGE SPEED

Owner-operators get no shortage of “encouragement” from shippers, consignees and others to hurry, so it’s easy to get into the trap of driving fast. But speed is the main reason for increased fuel consumption and reduced profit. Experts agree that every mile per hour driven over 60 mph reduces fuel economy by one-tenth of a mile per gallon. The typical argument against driving slower is that you can make better time by driving faster and therefore make more money. But compare one driver running at 70 mph and another running at 60 mph. Driver A is 10 miles further down the road than driver B, but at $4/gal., he’s spent $12.25 more to go those 10 miles in the same amount of time.

That might not seem like much money, but the impact over an entire year is stark. If you drive 130,000 miles per year and average 5.5 mpg vs. 6.5 mpg because you drive faster, you will spend $12,727 more on fuel. In essence, you gave yourself a 10-cent-per-mile pay cut.

Most owner-operators net about 40 cents per mile. If you divide the extra $12,727 fuel expense that driving faster costs by your net per mile of 40 cents, you would have to drive 31,818 miles more per year just to pay for the extra fuel. When you look at it this way, speed actually costs you time. Throughout the year, the hours-of-service limits will mean that on some days you’ll log fewer miles at 55 mph than you would at 65 mph. Even so, you won’t lose anything close to 31,818 miles.

LIMIT IDLE TIME

Idling requires about a gallon of fuel per hour, which can cost you about $160 per week at $4 per gallon if your truck idles eight hours a day. According to the U.S. Environmental Protection Agency, line-haul trucks not equipped with auxiliary power units might idle about 20 percent to 40 percent of the time the engine is running to power climate-control devices and sleeper compartment accessories and to prevent startup problems in cold weather.

Just because idling is common doesn’t make it smart. Idling on average costs $3,500 or more in fuel alone per year. This doesn’t include the added engine maintenance expense that results from excessive idling, which is harder on your truck’s engine than highway driving. In addition to operating costs, many governments impose no-idling laws with fines as high as $25,000.

Instead, there are many alternatives. An extra blanket for cold temperatures and window screens for when the weather is warm make it easier to turn off the engine. For about $80, you can buy a remote starter with a temperature sensor that will start the truck at a specified temperature. Infrastructure in truck stop parking lots to provide electrical power and auxiliary heat and air has continued to increase over recent years.

Auxiliary power units (APUs) can pay for themselves in a reasonable amount of time. A mobile generator costing as little as $200 will burn less fuel and provide heating and cooling. Not idling is even a point of pride for many truckers who long have realized the benefits of shutting down the engine.

Choosing idle-reduction technology. This can be a difficult decision. Systems and costs vary widely. Diesel-fired heaters are near the bottom of the cost range for purchase and annual maintenance (about $1,000 with purchase and a year’s worth of maintenance). Full-function diesel APUs/gensets are at the top, up to $8,000 or more.

Search with two main goals – finding a system that fits your application and one that gives a healthy return on investment. No one has cornered the market with a one-size-fits-all system. When deciding whether to go all-electric, diesel-powered or hybrid, the decision comes down to practical power-supply needs and personal preference.

Evaluate your idle-reduction need by keeping a detailed idle log. Write down every time you idle and why. Keep track of hours idled and sort them by reason, such as air-conditioning, heat, AC power, warming the engine, etc. Try this for a year, accounting for all seasons. That may not be practical, but if you keep this log for three months and are disciplined in your records, you will be able to make good estimates for the other seasons.

If you skip this first step, you will drastically underestimate the amount of time you idle; you’ll also fail to understand the reasons you idle. Idling solutions have pros and cons and most revolve around the reason for idling; if you idle only because you need heat, then a full-blown APU is overkill. A better solution is a small diesel-fired heater – easy and inexpensive to use.

If you idle to produce AC power for a computer, TV, coffee maker, microwave, etc., you also can find inexpensive alternatives to a diesel-powered APU. Inverters and absorbed glass mat batteries will keep small appliances running for days. Add a small solar panel, and you can keep the batteries conditioned and extend that time as well, perhaps using some of the new electrified parking installations if you need to park for an extended period.

Once you have a clear understanding of how often you idle and why, research the options in today’s market. Then calculate the break-even point and return on investment for each solution. This methodical approach will reward you with an idle-reduction technology that fits your operation and budget.

FIVE FAVORED FUEL SAVERS

Unprecedented gains in fuel economy have been made over the last few decades. Not too long ago, a long-haul tractor logging 6 mpg was considered enviable stuff. Today, forward-thinking drivers routinely see 8 mpg on long runs, and cutting-edge operators push the envelope past 10 mpg.

Overdrive asked readers in 2014 to choose the five technologies and design features they believe contribute the most to fuel economy. The top five results include two aerodynamic features and three other diverse components.

Roof fairings. The tractor-trailer aerodynamic revolution began decades ago with roof fairings. Long before fuel economy became a priority at fleets, it was obvious just from looking at a tractor-trailer that having air flow up and over a reasonably aerodynamic windshield only to smack headlong into the front of a tall, flat trailer was an extremely inefficient way to run a vehicle. Today, manufacturers offer fully integrated roof fairings as standard equipment because they are so effective and the vast majority of fleets and owner-operators want them. Airodyne says that a full roof fairing delivering just a 10 percent increase in fuel economy can save $6,900 a year in fuel. Even more basic flat-style roof fairings, typically found on daycabs, can deliver up to 5 percent in fuel savings.

There’s plenty more you can do to make your existing truck more aerodynamic. Snug the trailer tight to the tractor, which cuts down on wind resistance. Add chassis fairings, cab extenders and aerodynamic mirrors. Mount air cleaners under the hood. Use all-position tires on the rear, and make sure they’re the same tread as the steer tires. Match your sleeper package to your application; when you’re pulling tanks or flatbeds, a flat-top or mid-roof sleeper may be the most aerodynamic option. And keep your gross vehicle weight as light as possible; even if you make up for those weight savings with heavy loads, you’ll greatly improve your fuel economy per pound of cargo. If you run wide-single tires instead of duals, cut down your mudflaps, or invest in flaps that match the width of your tires.

Low-rolling-resistance tires. Because tires can have such a big effect on your mpg, low-rolling-resistance tires have become prime tools in fuel economy efforts. A deep tread tire will have more rolling resistance when it is new because there is more squirm in the tread, and the engine requires more power to overcome that resistance. Low-rolling-resistance tires use advanced compounding materials to construct tires with more durable tread but at shallower depths. The durability from the advanced materials gives the tire a service life comparable to tires made from more traditional compounds.

A truck can use as much as $60,000 worth of diesel a year, which translates to about 21,818 gallons. By switching to low-rolling-resistance tires, starting with the trailer axles and continuing with steers and drives, the truck could save as much as $2,100 per year in fuel costs.

Aluminum wheels. At about $350 a unit, aluminum wheels can cost up to three times more that those made of steel. But most long-haul fleets looking to take all possible weight out of a tractor are willing to pay that premium. Alcoa’s most drastic weight savings package with aluminum wheels is a 14-inch wide-based tire configuration. The total weight savings on the axles and wheels is 1,400 pounds. The weight reduction translates to a fuel savings and, depending upon freight, extra revenue. Also, resale value for aluminum wheels results in a 75 percent return on the original investment up to 10 years later, which is far more than steel wheels.

Trailer side skirts. Manufacturers say these devices can boost fuel economy by more than 5 percent and cost about $2,900 per trailer to install. Trailer side skirts were the first serious attempt to streamline air moving past the dry van’s bottom to eliminate drag and turbulence. They have gone from curiosity to commonplace in a short time.

APUs. Auxiliary power units are expensive, but an operator used to extensive idling can see a return on investment long before the unit wears out. For more APU discussion, see the main text of this chapter.

OTHER SMART PRACTICES

In addition to reducing speed and idling, there are several other good fuel conservation practices, each of which can reduce your fuel bill by 1 percent to 3 percent – or several hundred dollars a year:

WATCH CASH FLOW. Don’t tie up money needlessly in the fuel tank when downtime of a few days or more is expected. If you know a low-price area is on your route, don’t fill up at a more expensive stop; limit your purchase based on your mpg.

BUY THE RIGHT FUEL. If you’re in an area where farm vehicles are prevalent, it may be hard to find ultra-low-sulfur diesel. Check labeling if you buy from any outlet that’s not clearly a truck stop. With post-2010 engine technology, low-sulfur diesel would interfere with proper operation of the diesel particulate filter and the selective catalytic reduction system, and could cause permanent damage.

BE CAUTIOUS WITH BIOFUEL. Biofuels tend to be expensive and produce lower fuel mileage. Know the level of biofuel (B20 is 20 percent biofuel) allowed under your engine maker’s warranty, and use only approved fuels. Carry extra fuel filters, as biofuel can cause clogging.

MAXIMIZE STORAGE.Whether you’re buying a used or a new truck, opt for larger dual tanks. This gives you the option of pigging out on super-cheap fuel and cutting down on the number of fuel stops, saving time.

SPEC YOUR TRUCK WISELY. Your paycheck will show whether you chose a truck with a big engine and a lot of chrome or a truck engineered to meet your business needs and help you succeed. First, there is the initial extra expense for the purchase, then the added cost of fuel consumption. Weight and maintenance are in even sharper contrast between a lifestyle truck – a wannabe show truck – and an aerodynamic truck that is an efficient tool for business. In fuel savings alone, the aerodynamic truck generally more than offsets the resale value of the stylish truck. It also yields greater load capacity, more comfort, less noise and higher profit.

On the other hand, operators with too-low horsepower settings for the application will find their feet always hard on the throttle, consuming more fuel. Some have benefited in fuel economy by retuning the engine control module for maximum fuel economy, installing full-flow mufflers or utilizing one of several new engine/transmission combinations built for maximum mileage, offering peak torque at much lower rpms than traditional diesels.

CONSIDER ALTERNATIVES TO DIESEL. Interest in natural gas as a viable Class 8 fuel skyrocketed during the unprecedented 2007-08 fuel price spike. That brief affair ended as prices dropped when the subsequent recession hit. Though natural gas fueling infrastructure is lagging, several new networks are expanding. Truck manufacturers have put big investments in natural gas technology and products. While natural gas trucks are expensive, they have shown a relatively fast return on investment in recent years with a decidedly lower cost of the fuel during times of high diesel prices. A new natural gas truck can cost as much as $40,000 in incremental upcharges over a conventional and comparable Class 8 diesel truck, but cost-per-gallon equivalent has been as little as a third the cost of a gallon of diesel. Despite power density and range limitations compared to diesel, natural gas appears to be working for those willing to accept those tradeoffs in return for lower fuel prices, and could play a bigger role if diesel prices rise significantly from the low levels of early 2016.

PERFORM REGULAR MAINTENANCE. This ensures your truck is running efficiently. Also, check your current miles per gallon at each fill – if it falls off, determine the reason. Start a preventive maintenance routine; check often enough to catch low oil, a dirty air filter or an air compressor leak. Don’t use a higher-viscosity oil than you need. Get any dangling bumpers or cockeyed mirrors fixed immediately, as they’re adding to your truck’s air resistance.

MAINTAIN TIRE PRESSURE. To reduce rolling resistance, check air pressure in all 18 tires and fill them up at least weekly to the manufacturer’s specifications. The trailer tires may belong to your carrier, but why pay the extra cost of pulling a trailer with underinflated tires?

SLOW YOUR ACCELERATION AND DECELERATION. Both will consume less fuel and be easier on the mechanics of your equipment. Slowing acceleration is especially important running on hills or in the mountains because it helps reduce the effects of gravity. Rapid acceleration gets you an extra few seconds but creates premature wear on the engine, driveline and tires – along with increasing your fuel costs. Hard and frequent braking converts precious fuel to wasted energy; much of the fuel you need to get up to speed again is lost. Safety experts recommend watching ahead a distance of 12 seconds so you never have to react at the last second. You also won’t ever have to engage the engine retarder in city traffic if the “12-second rule” is followed.

SHIFT WISELY. Don’t drive by engine sound but by rpm. If you’re not absolutely sure about your engine’s sweet spot, ask the manufacturer.

CUT OUT-OF-ROUTE MILES. If you’re like many owner-operators with 6 percent to 10 percent of your miles out of route – lost to detours, side trips and simple “Did I just pass my exit?” confusion – you possibly could cut them 3 percent. Doing so would save an extra 3 percent on fuel, as well as on other variable costs such as tires and maintenance. Rethinking your route, keeping side trips to a minimum and using precise directions will pay off in savings.

GETTING A FUEL SURCHARGE

As fuel prices have trended higher over many years, fuel surcharges have become more widespread and – in many cases – more generous, as carriers have used them to help operators guard against price spikes.

HOW TO FIGURE WHAT A SURCHARGE IS WORTH. As long as you know your truck’s fuel economy, you can calculate how well a fuel surcharge compensates you for rising prices.

Many carriers pay a surcharge when the national average price for a gallon of diesel, as reported weekly by the U.S. Department of Energy, exceeds a certain price – often $1.10 to $1.25. The surcharge increases incrementally with diesel prices, either on a cents-per-mile basis or on a percentage of what the customer pays the carrier for the load. Carriers often structure their surcharge scale by assuming a certain fuel efficiency, such as 6 miles per gallon.

Some owner-operators make a healthy per-mile profit from their carriers’ surcharge because good fuel economy practices allow them to average better than 6 mpg. While surcharges traditionally have been based on the national average of diesel prices, in recent times – particularly in the case of dedicated regional routes – they are based on regional prices or prices along specific lanes. This can be a double-edged sword with customers; the same company that will pay extra for loads traveling only in Western states might ask for a discount on trips in other areas. For examples of surcharges along specific lanes, visit www.fuelsurchargeindex.org.

SURCHARGE FIGURED AS PER-MILE. Suppose a surcharge is designed to cover increases above $1.25, and fuel costs $4. Ideally, you’ll receive a surcharge covering that $2.75 spread.

If your truck gets 6 miles per gallon, divide $2.75 per gallon by 6 mpg. That equals 46 cents per mile. A surcharge at that level allows you to break even. Now assume you actually get 7 mpg. Dividing the $2.75 by 7 means a surcharge of only 39 cents per mile is needed to break even. If you’re driving for a fleet that has a surcharge based on its company trucks’ 6 mpg average, you come out 7 cents per mile ahead.

SURCHARGE FIGURED AS PERCENTAGE. An owner-operator offered a surcharge that is a percentage of gross revenue does a similar calculation. Take the same situation – you get 6 miles to the gallon and diesel is $4 a gallon, so you need a surcharge of 46 cents per mile to cover your costs. Assume you’re offered a 1,000-mile haul for $1,100 in gross revenue. Start with your 46 cents per mile target for a surcharge and multiply by miles.

Now see what your $460 surcharge would be as a percentage of the gross. Divide it by $1,100 to get 42 percent. That’s the level you need to cover your extra fuel costs.

There are no rules covering fuel surcharges. As with freight rates, anything goes. But once you understand how surcharges work, it’s easy to see the potential for profit. Because fuel surcharge calculations involve some sort of fuel mileage average, a fuel-efficient owner-operator or small fleet owner always can beat the averages.

FINDING THE CHEAPEST FUEL

An effective fuel-buying practice is to maximize fuel purchases in low-fuel-tax states and mileage run in those states. The International Fuel Tax Agreement between the United States and Canada facilitates the reporting, collection and distribution of taxes to states and provinces. You pay taxes every time you fuel, but your ultimate fuel tax bill is calculated according to where you drive. If you purchase fuel in high-tax states and drive most of your miles in lower-tax states, you will get a refund when you file your IFTA report.

You cannot lower your tax outlay unless you choose hauls that avoid high-tax states. What you have more control over is how much you pay strictly for fuel when the fuel tax is not considered.

PUMP PRICE – TAXES = REAL COST. The key to finding the cheapest fuel is to know the current fuel tax rates, both federal and state, and any state surcharges. Subtract taxes to find the raw fuel cost in each state, then buy where fuel is cheapest. The strategy means that you buy without regard for whether you are paying more at the pump – or in taxes at the end of the quarter.

IFTA also considers state surcharges, which complicate the fuel-buying strategy. Indiana, Kentucky and Virginia have per-gallon surcharges; New Mexico, Kentucky, Oregon and New York have per-mile surcharges. While some owner-operators buy only enough fuel to get through surcharge states, this practice can backfire, depending on the actual cost of the fuel in each state. There may be times when buying more fuel in a surcharge state is more economical.

Part of the challenge in smart fuel buying is keeping up with changing surcharges and taxes; Georgia, Massachusetts and New York revise their fuel taxes quarterly, and North Carolina revises its own semi-annually.

Other fuel-buying costs depend on how your fuel taxes are managed. Most leased owner-operators depend on a carrier to collect and distribute fuel taxes. If you’re leased and your carrier handles your fuel taxes for you, simply look for the cheapest pump prices. Some carriers charge a fee for this, and some pay simply by averaging the mileage of their entire fleet. If your carrier does that, and you average a better per-gallon average than the fleet, you could be paying more tax than you actually owe; for this reason, some make the case that it’s always best for an owner-operator to handle his/her own fuel taxes.

Whatever the case, a good lease will itemize all charges, including fuel taxes and how they are assessed. If your settlements do not reflect what is stated in your lease, you should ask for clarification and, if necessary, look for an alternate method of paying your tax. Not all carriers, however, allow leased operators to opt out of their system, so make sure you understand how the carrier handles IFTA before signing on.

You must get your own IFTA account to do your own fuel tax reporting, whether you do it yourself or through a third party. You do not have to have your own operating authority to get an IFTA account, but independent owner-operators must have such an account in their base plate state and be responsible for quarterly reporting. You also can use knowledge of state fuel taxes to smooth out your cash flow and avoid paying surcharges or large tax bills.

GETTING WITH THE PROGRAM

Owner-operators often can save a hefty amount of money when they are able to participate in major carriers’ discount fuel networks. If your fleet has a fuel-optimizer program, use it. An optimizer program helps an owner-operator plan a trip based on fuel prices and locations in the carrier’s fuel network. Fees for using such networks have become rare thanks to competition for drivers

Owner-operators are well advised, however, to pass up network fuel stops that are too costly, are too far off route, sell inferior fuel, are dangerous or poorly maintained, or are perceived as a profit center for the carrier at owner-operators’ expense. If you have concerns about a stop on the fleet network, respectfully bring them to the fleet’s attention.

The National Association of Small Trucking Companies offers members the opportunity to tap into the association’s directory of fueling stops to find the lowest prices.

The Business Manual for Owner-Operators
Overdrive editors and ATBS present the industry’s best manual for prospective and committed owner-operators. You’ll find exceptional depth on many issues in the 2021 edition of Partners in Business.
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