It’s no secret that the trucking industry has faced challenges over the last few years. The “great trucking recession” led to a mass exodus from veteran and newer members of the trucking workforce. Today, we will cover some of the biggest challenges for the trucking industry over this past year and what led to them. 

How we got here

During the pandemic era, new workers flooded the trucking industry. Between “get-rich-quick” promises and the potential to be self-employed, long-haul trucking was an attractive option to many people. The conditions were ripe for a boom. Consumer spending was up and fuel prices were down. Things were looking great.

Unfortunately, that didn’t last. As one expert put it, the industry went from “going 100 miles per hour to almost a complete halt.” But what exactly has led to the bust in the trucking industry? Well, a combination of increased fuel prices, decreased freight volume, and classic supply and demand dynamics.

Increased Fuel Prices

Fuel prices plummeted during the pandemic. Between the lack of demand due to lockdowns and the global oil surplus due to the Organization of the Petroleum Exporting Countries (OPEC)’s political infighting, diesel prices were driven to their lowest point since February 2016 at $2.39 per gallon. 

At the time, low fuel prices increased trucking profits, but since cars have returned to the road and crude oil prices have increased, diesel prices have skyrocketed. This increases operating costs and cuts into a trucking company’s bottom line.

Decreased Freight Volume

During the pandemic, freight volume rose sharply. Between the stay-at-home requirements of lockdown and other spending factors, e-commerce increased significantly and new construction was popping up all over the country to support the booming housing market. The increase in spending and new construction led to increased freight volumes and jobs for truckers. Companies couldn’t move products fast enough!  

Now, the economic slowdown has mellowed spending across the board and freight volumes are down; however, there are still the same number of increased trucks on the road. Competition for work is fierce, so shipping rates have plummeted and trucker’s profitability has taken a big hit. 

Supply & Demand

At the end of the day, a lot of the financial issues can be boiled down to supply and demand dynamics. During the pandemic, the demand for truck work was high, and the supply of truckers was low, so everybody could get a piece of the pie. Even as new truckers entered the workforce, the sheer amount of work made it easy to make money in the industry. Today, freight volume has leveled out, fuel prices have risen, and profitability has decreased.

While the future of the trucking industry currently looks bleak, 2024 offers a breath of fresh air. It appears that the US economy weathered the initial “inflation storm,” and that rates are slowly dropping to the reserve’s targeted 2.6%. The trucking industry is the backbone of America, with 70% of all goods transported by truck. It is a fundamental part of the economy and, while things might be tough now, we’ll come to rely on our essential workers once again.

With this information, what can you do to protect yourself and your business? While your profits might not be where they were this time a few years ago, improvement and hope are on the horizon. Be sure you’re prepared for a new season and year with the proper insurance policies. Downloading our free Transportation Insurance Checklist can help you evaluate your policies, allowing you to determine what adjustments or additions you can make to better protect your company assets, employees, and business. Click here to download or the checkmark below!