With the average nationwide price of diesel officially over $4/gal., discussion inevitably turns to whether this development will impact the new and used truck market in the short term. Currently, we do not foresee fuel prices fundamentally altering the factors governing new and used truck demand.
The trucking industry has gone through two major “cleansing periods” in the past decade – the first in the early 2000’s thanks to the combination of an economic downturn, rise in insurance prices, higher fuel costs, tightened credit, and a glut of used trucks – and the second over the past 3-4 years thanks to the Great Recession. Fleets and owner-operators who survived these challenges likely have enough headroom to absorb continued moderate increases in the price of fuel. In addition, fuel surcharges will be activated, alleviating some of the cost pressure. So don’t expect any shakeouts in the transportation industry.
As for fuel pricing itself, most analysts do not foresee diesel prices rising much past the mid-$4/gal. range, if that. Worst-case scenarios could of course be quite a bit worse, but those scenarios are relatively unlikely at this point in time.
In a larger sense, higher fuel prices could and probably will slow down the nascent economic recovery, which will impact every segment of the economy, including trucking. But again, with increases on the level forecasted, we’re talking incremental changes, not huge shifts.
As it pertains to used truck values, it is likely that prices already hit their upper limit in the 3rd quarter of 2011. The main factor behind used truck pricing has been mileage – specifically, ever-increasing mileage of the pool of available used trucks. Mileage should remain the primary factor in a used truck’s value going forward, with the price of diesel an indirect threat based on its impact to the general economy overall.