Today, we are going to dive into several issues that – though unrelated – all impact the trucking industry, as well as other transportation-sector related industries. With the U.S. economy on a tear and another election having come and gone, so many aspects of American society are in flux. As changes come and go, they present new challenges to industries both young and old.
The first of the challenges we are going to look at is that of a changing landscape where marijuana is concerned. This may seem like an odd topic, but it certainly is one that trucking companies have on their mind. Let’s find out why.
The ATA Talks Marijuana
At the ATA’s 2018 Management Conference & Exhibition, Abigail Potter, who serves as the manager of safety and occupational policy for the advocacy group, made a powerful statement when she said that “the legalization of marijuana is an issue that is not really an if, but a when. This really has opened up the accessibility of marijuana and has really started to break down the stigmas of marijuana use.”
Indeed, there is a great big unknown percolating within the industry in regards to how federal and state enforcement authorities and trucking companies will deal with the proliferation of state laws allowing the medical and recreational use of marijuana. At the time of this publication, 31 states and the District of Columbia allow medical marijuana. Nine states and the District of Columbia, and Canada, have laws permitting the recreational use of the drug.
The changes in state and national law, on both sides of the border, carries implications for truck drivers and trucking companies as they figure out how the scope of the law impacts employment and business concerns. It is important to note that interstate truck drivers are not permitted to use marijuana while operating a commercial motor vehicle. Further, they are not even allowed to have trace amounts in their systems. Federal laws also do not permit trucking companies to transport marijuana.
One of the problems, however, is that law enforcement officers do not have the equipment necessary to field test truck drivers for marijuana. The only way to test a truck driver for marijuana intoxication is to conduct a blood test at a law enforcement station. This cannot be done on the roadside.
In Canada, regulators are facing a unique challenge. With recreational marijuana use becoming legal on October 17, officials are trying to figure out how they can find a new way to categorize marijuana. Previously, whenever Canadian officials had addressed issues related to drugs or alcohol, they looked at them within the context of U.S. DOT regulations. Those days are now over.
Within Canada, a new problem has arisen in which Canada’s 10 provinces have set up their own patchwork of rules and regulations governing the relaxation of marijuana laws. They are looking at everything from the difference between impairment and recent use and what Canadian truck drivers traveling into the U.S. will do, specifically where marijuana transportation is concerned.
How will trucking companies on either side of the border address these concerns? With the new laws, rules, and regulations coming on rapid fire, only time will tell which way this will go.
How the ELD Mandate Impacts Consumers
According to a 2017 report by the ATA, the United States was short by 36,500 truck drivers in 2016. Even more, the ongoing truck driver shortage has become even more acute in 2017 and 2018, with a large driver of this being the ELD mandate.
Truck drivers have been facing problems of diminished capacity and operating efficiency due to the constraints the ELD mandate has put on daily operation. As a result, shippers in general are finding it difficult to find the trucks they need to move their freight.
This, in turn has had an outsized impact on the consumer. In an effort to bid for truck drivers, shippers have upped their freight rates to record highs. To account for these rises, trucking companies have increased wages and benefits packages. The knock-on effect has a direct impact on what consumers pay for everyday goods.
To give an idea, some of the brands that have indicated they will raise prices to account for higher shipping costs include:
- Hormel Foods
- Betty Crocker
- General Mills
- Tyson Foods
Even Amazon has felt the pinch, stating that the reason they increased the price of their Prime memberships in April was due to soaring shipping costs, which they stated represented a 38% year-over-year increase in operating costs.
While some may bristle at the idea of pointing to the ELD mandate as the source of these problems, many truck drivers and trucking companies would agree that the mandate going into effect represented a monumental shift in how trucking gets done, which resulted in a knock-on effect, leading to higher consumers prices.
How the ELD Mandate Impacts Small Businesses
Higher operational expenses translated on to consumers have also had a negative impact on small businesses. A large percentage of small businesses utilize the trucking sector to transport their goods, and with government data showing an 8 percent rise in those costs, small businesses are feeling the pinch.
The squeeze is also manifesting itself in more than just prices. Strict guidelines on truck driver and operating schedules mean that businesses may be looking at more delays and less flexibility due to the lack of trucking resources available to them. This problem becomes more acute as large trucking operators eat up available capacity at a breakneck pace.
Small trucking companies focused on heavy freight deliveries could themselves face dramatically higher costs as the complexities involved with moving specialty goods over long distances impacts the numbers of individuals being able to fill these positions. Cost also extends beyond simply finding the right people.
There has already been a higher cost burden with small trucking companies adopting the ELD mandate and switching to new sets of equipment to track hours of service regulations. Will less heavily-financed trucking operators be able to stay competitive in a changing market? Furthermore, will Congress finally do something to modify the rules that are having such a negative impact on how truck drivers get the job done? At this point, only time will tell.
An Obscure Rule Shakes the Transportation Sector
You may not have heard of it, but an obscure regulation targeting the international marine shipping industry will likely have a big impact on the economy, including the price of airline tickets and diesel fuel. While the change mainly impacts large ships, which use high-polluting low-grade fuel, the impact could be far more widespread.
The International Maritime Organization has introduced a sulfur limit rule set to go into effect for 2020. Known as IMO 2020, the rule will decrease the amount of sulfur allowed in fuel from 3.5 to 0.5 percent. To comply with the new regulation, many ships will likely switch to diesel. This switch will result in the highest increase in diesel fuel demand ever seen.
When the change goes into effect, expect to see diesel fuel prices rise dramatically. It is entirely possible the price of diesel will increase by around 30 percent. Since nearly every transportation sector relies on diesel fuel to move products, whether by truck, train, or boat, it could spur major inflation across world economies.
The airline sector is not immune from these potential changes, either, since diesel and jet fuel are similar in grade and typically sell for a similar value. It is likely that if diesel prices spike, so too will jet fuel. There still could be some ways in which shipping companies could get around simply switching to diesel as a viable alternative.
Some shipping companies have stated they will install scrubbers in the exhaust stacks of their vessels. In fact, according to the Canadian Fuels Association, shippers operating north of the border are expected to install scrubbers in the stacks of around 2,500 cargo ships. Yet, with more than 85,000 ships operating globally, will that be enough?
Fortunately, there is still time. IMO 2020 has been in development for more than 10 years, so they are trying to phase in the changes to prevent a dramatic rise in the price of diesel fuel. Many trucking companies hope the impact will be short-lived, since a rise between 4 and 34 cents per gallon could have seriously detrimental effects on the industry as a whole.
With these and so many other issues facing the transportation and trucking sectors, the prospects for continued economic growth remain unknown. How inflation will fare and if industries can adapt to a changing landscape remains anyone’s guess.