American Trucking Association's CEO Bill Graves Explains The Impact of Oil Prices On His Industry
Monday, April 28, 2008PAUL KANGAS: Those tight oil markets have already driven U.S. diesel prices to an average price of $4.18 a gallon. And this is why about 100 independent truckers took to the streets of the nation's capital today, urging lawmakers to help bring down fuel costs. For more on the truck industry's struggle, Darren Gersh talks with the American Trucking Association's CEO Bill Graves. Darren started off by asking whether big trucking companies are under the same pressure as the independent operators protesting today.
BILL GRAVES, PRESIDENT & CEO, AMERICAN TRUCKING ASSOCIATION: We certainly have the same issue in that the price of diesel fuel and gasoline -- and we consume significant quantities of both -- those record prices are making it very, very difficult for our members to stay in business. We're seeing a lot of people exiting the industry, companies closing down, going out of business so at the very moment, we need the economy going full tilt. The fuel prices are hitting us sort of like a double whammy.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Which of those whammies is worse? I mean if the economy was all right, would you guys be saying, OK, well, we'll just have to pass this along, but we're still making money here or is it because the economy is down that the gas prices, the diesel prices are hitting so much harder?
GRAVES: Well, I think that they both hurt but that's really a great question and I wish I was an operator answering your question. It appears to me as the head of the trade association that it might even be more of the soft economy because when there's freight to move, when there's a demand for your capacity, there's a much more vibrant market for pricing freight and a greater opportunity to recoup the true cost in your freight movement.
GERSH: So you guys are here in Washington, the truckers are here, the independent truckers are here, the big truckers are here. What do you guys think Congress can actually do about this? I mean there's a lot of discussion I hear about people saying, oh, you know, stop subsidies to oil companies. Is that really the problem here? Is that going to solve this problem or is it supply and demand?
GRAVES: Well, I think it's sort of market fundamentals as we say. I think a lot of it is supply and demand. Clearly we have worldwide a lot more demand today for diesel fuel than we've ever had. Add to that the fact that we've been asked by EPA over the last several years to begin burning a new ultra-low sulfur diesel fuel that's better for the environment. That's a fuel that it costs more to refine. It's a more expensive fuel. So you get a lot of factors right now that have contributed to this perfect storm.
GERSH: What about not filling the strategic petroleum reserve. There's been a lot of discussion, to stop doing that, but that's only 70,000 barrels of oil a day I believe. Is that a big deal?
GRAVES: The potential benefit there is I mean first of all, I don't manage filling the strategic petroleum reserve, so I don't know all the nuances of it. But certainly I hope we're not filling it at $100-plus a barrel of oil. That wouldn't seem to make any sense for the U.S. taxpayer. But secondly there is an unknown factor right now about the extent to which speculators, people who are out in the financial markets trading, buying, you know, hedging on fuel prices, what impact they might be having on the price of oil and therefore the price of fuel. We certainly think it would be worthwhile for Congress to take a pretty hard look at that and try to get their arms around whether or not, that some have suggested that 20-30 percent of the cost of oil today is being driven up by the market speculating on the prices. I don't know if that's a fact, but it's probably worth looking at.
GERSH: The folks in the market say, look, it's just commodity funds, pension funds, putting their money in trying to protect all the people who rely on those pension funds from inflation. Do you not buy that argument?
GRAVES: Well, I mean, that might be their argument, but if you look at what's going on in the world right now with the inflationary sort of, you know, push on almost every commodity, there's something going on in the grain markets, in the fuel markets. Everything is going north on us and it's creating not only tensions in the United States, but obviously worldwide as I'm sure you know. And that is not a healthy situation to be in in terms of stability around the world and in terms of quality of life that we enjoy here in this country.
GERSH: Bill Graves, CEO of the American Trucking Associations. Thank you very much.
GRAVES: Darren, my pleasure.
