Already squeezed by recent insurance rate hikes, B.C. companies in the transportation business are coping with skyrocketing fuel price increases by upping fuel surcharges or rates and investigating fuel-efficient alternatives.

And the head of the B.C. Trucking Association warns fuel cost increases could cause “significant harm” to the industry.

“Unlike costs of equipment and labour, fuel costs will fluctuate widely,” said Paul Landry, chief executive officer of the B.C. Trucking Association,which represents 700 vehicle fleets and more than 13,000 of the estimated 20,000 commercial vehicle owners in the province.

The spiralling cost of fuel is one of a number of factors that have decreased margins in the trucking industry over the past few years and resulted in a 10-per-cent decrease in the number of trucking firms in the province, Landry added.

Don Denton photo, Business Edge
Maximum Express driver Kareem Smith takes a hit at the pumps in Victoria.

Higher fuel prices “undermine economic growth and job creation,” agreed Laura Jones, vice-president of the British Columbia and Yukon branch of the Canadian Federation of Independent Business.

Although a number of the factors that govern fuel price increases are beyond the government’s influence, “the tax burden is one obvious place to start,” Jones said.

“Combined federal and provincial taxes account for 40 to 50 per cent of the price, compared to 20 to 30 per cent in the United States,” said Jones.

The federal government could remove the 1.5-cent per litre gasoline tax it levied to help erase the deficit, she added. “The reason for the tax has disappeared, but the tax hasn’t.”

Climbing pump prices are forcing many B.C. companies to hike their fuel surcharges.

“Fuel costs are 30 per cent of our expenses,” said Al Hasham, president of Maximum Express, which runs a fleet of nine trucks in Victoria and has just opened a three-truck operation in Vancouver.

Maximum Express recently increased its fuel surcharge to 6.5 per cent from 5.5 per cent. Although some customers were upset by the increase, Hasham said the company didn’t lose any business. “Our customers were very reasonable. They understand why we had to do it.”

Al Hasham

Even so, extra revenue from the fuel surcharge doesn’t begin to cover recent increases in costs, he added.

“We’ve had to increase our fuel surcharge on three occasions,” most recently to 7.5 per cent, agreed Hanne Madsen, general manager of Dan Foss Couriers, which has a 45-truck delivery fleet serving the Fraser Valley and Vancouver Island. The surcharge has fluctuated over the past two or three years from zero to 7.5 per cent.

Fuel varies from 15 per cent to 35 per cent of trucking companies’ costs (averaging about 30 per cent). Most large commercial vehicles are diesel-powered and the price of diesel has soared about 30 per cent over the last six months. Consequently, operating costs have increased up to 10 per cent in half a year, he said. At press time, prices for gasoline were still volatile, but hovering just under the dollar-per-litre mark in Victoria and metro Vancouver, where gasoline consumers also pay a four-cent per litre transit tax.

Pumps in mid-Vancouver Island were a cent or two less, but bargains were to be had – as low as 85.9 on the Sunshine Coast and just over 87 cents in Hope.

The trucking association has sent out an advisory to its members with a chart showing how fuel costs have fluctuated over the past 15 months in response to events such as the 2001 terrorist attacks on New York and Washington, and the Iraq war.

It is also recommending members levy a fuel surcharge, which is calculated as a percentage of the rate and added to an invoice like the goods and services tax.

Landry said the size of a fuel surcharge depends on whether the trucking company has increased rates to reflect rising costs. In order to be more competitive or to please customers, companies will sometimes keep a lid on rates.

“If they haven’t kept their rates current, the surcharge could be 20 per cent to 25 per cent,” said Landry.

“I think everyone is going to have to review rates,” added Madsen. “A lot of us tried to hold or maintain prices, but a number of companies closed or merged because they were not charging compensable rates.”

The prospect of continuing high prices has already forced operators to consider basic changes to the way they do business.

Increasing costs forced Dan Foss Couriers to switch from same-day delivery to overnight service. “It allows us to use the fleet more efficiently,” said Madsen. “Dispatchers can organize routes so drivers are delivering in a logical fashion.”

At Maximum Express, Hasham has cancelled an order for four new trucks, giving him time to review operating costs using different fuels.

“Fuel prices are not going to go back down,” he said.

“Diesel or propane doesn’t have as dramatic increases as gas prices. I’m contemplating going to propane (trucks).”

In the taxi industry, however, there is less flexibility. Taxi rates are set by licensing authorities, so cab firms don’t have the luxury of surcharges or rate hikes. To keep ahead of fuel cost increases, cab companies will begin switching to smaller vehicles, predicted one Victoria operator.

“There’s a lot of fat to be trimmed,” said Mark Fisher, manager of Concorde Taxi and Sightseeing. “Compared to Europe, where fuel prices are higher, our engines are twice as big.”

Cab companies that don’t find some means to trim their costs will simply see their income dropping, he said, adding Concorde decided from the outset to use vehicles with smaller engines than most North American taxi companies.

Fisher, who’s been in the taxi business in Victoria since 1991, said that rates in Victoria have increased only 16 per cent since 1989 – way behind cost increases, let alone inflation.

The Capital Region Taxi Owners Association is discussing seeking a rate increase from the B.C. Motor Carrier Commission.

Fuel accounts for 40 per cent of taxi operating costs, and most are gasoline-fuelled. Rates in Victoria, for example, are now $2.50 to start and $1.45 a kilometre travelled.

Meanwhile, high gasoline prices aren’t translating into more sales of smaller vehicles. Shock over high prices will wane as consumers adjust to the higher price as normal, predicted one manager for an import car sales firm with five dealerships in the Lower Mainland.

But if prices remain high for the next season, consumers could begin investing in more fuel-efficient vehicles, he added.

And, of course, little affects the luxe sailing market. “This is not a business where people come in to save money,” sniffed the manager of one Vancouver-area yacht dealership, who asked not to be identified. “Fuel prices aren’t going to affect us until they hit the $2/litre range . . . if then.”