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Tuesday, August 9, 2022

Gas Money

In January 2007, Steve McClellan accepted a job as the vice president of Professional Transportation Inc., an Evansville-based transportation company. That was one year before gas prices skyrocketed to nearly $4 a gallon. For McClellan, this gas spike was fairly brief. “We didn’t really start seeing the downturn until later in 2008 and through a good portion of 2009,” he says. Still, during that time period, PTI added 350 workers after being awarded a new contract with Union Pacific Railroad, a company with 43,500 employees and a $3.6 billion annual payroll. PTI is large in its own right with 181 locations in 26 states, and with the 2009 contract, the company added 17 new branches and approximately 140 more vans to its fleet.

How did PTI make money in the transportation industry when gas prices were so high? “It seemed that the gas spike in 2009 was a little more short lived,” McClellan says.

Now the gas spike is back. “I read there are some projected drops of prices this year, but that remains to be seen.” One reason for such uncertainty, a few experts contend, comes from a warring and oil-rich Middle East. The ongoing struggle between Libyan leader Muammar Gaddafi and the rebels has ceased oil production, for example.

With gas prices near $4 a gallon again, how can PTI — and other transportation companies — weather the storm? After all, PTI has approximately 1,300 vehicles in their fleet, mostly passenger vans and a few full-size vans. McClellan estimates PTI drivers will travel 100 million miles this year. The fuel cost on those vehicles is “in the neighborhood of $20 million,” McClellan says. Here, he explains why a $4 gallon shouldn’t send the masses into a panic.

Gas prices never sit still for long. How do you map out expected expenses?

It can be a little difficult to map out, but what we have to make sure we do is to ensure we have proper management processes in place to monitor corrective action where necessary by using technology. Just like any performance metric we have for our customers, we too try to address these cost considerations with the same aggressiveness.

Any form of a fuel surcharge reimbursement is our second largest expense to labor, so it is a priority. We have national fuel discount programs with national organizations that provide management services. This offers extensive reporting capabilities from those organizations to bring to us consumption by unit, meaning each individual has an identification for their fuel purchases.

We’ve had GPS units in our vans for a few years, but we are taking that to a next generation of technology where there is also an onboard diagnostics capability and will report many things related to fuel consumption and vehicle operation. It is a behavior-based opportunity to ensure our driving habits are safe and efficient and effective.

Are you looking for vehicles that are more fuel efficient?

That’s always a consideration. Our customers have certain requirements for size and capacity for the large number of passengers, so we have to provide a vehicle that can at least meet those minimum requirements. As opposed to doing the full-size, express-type vans, we do the minivan. Right now, we are using a lot of Dodge Grand Caravans, Toyota Siennas, Chrysler Town & Country-type vans that are more fuel efficient than a lot of the full-size units that are out there.

At this point, there’s not an infrastructure in place to support the electric-type units because we’re not a route-based operation within a city where that ready fuel supply — either for natural gas or electric charge — is available. At some point in time, hopefully the infrastructure will be there to move us in that direction. [pagebreak]

Do you feel like Americans are more prepared to face a rise in gas prices?

I don’t know if I have seen a difference one way or the other. We deal with different areas than individual consumption behavior. From our perspective, I don’t think rising fuel prices is a surprise at all as the economic recovery continues and as recession pressures continue. I think it is reasonable to expect that higher fuel prices are going to follow. It’s not just local or national economic recovery; it’s worldwide so that demand is going to have an impact on fuel pricing.

Do clients such as Union Pacific Railroad have the ability to keep shipping charges low?

Their crews need a movement — to a train from a train to a terminal. They will contact us to be there on time to move that crew where they need to go. That activity has increased this year over last year.

That’s an interesting tie to the fuel price scenario because rail traffic is, second to barges, the most efficient transportation that we have. As fuel prices continue to increase, rail transportation becomes a little more attractive for manufactures and any bulk transfer operators that need goods moved. A rise in fuel prices can drive more cargo to the rails because of their efficiency. By default, that will help our business operations as well. The more traffic they have, the more trains are moved, the more crews are on duty, and that’s where we come in to assist them. It’s a little double-edged for us in that sense.

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