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How to Save Fuel and Money on Semi-Trucks
Information in this piece created in collaboration with Overdrive Magazine.
Diesel fuel is still the reigning king in the trucking industry, but electric trucks are expected to become a legitimate contender in the next decade. Some predict that by 2026 that electric trucks could make up 5% of all truck sales. We’re still pretty far away from this becoming a reality so it’s best to learn how to control the cost of diesel fuel to save money and be profitable as an owner-operator.
The first step to control fuel costs is to know what your fuel economy is which is calculated in miles per gallon and by calculating your fuel cost per mile (CPM). Calculating your MPG is pretty easy: simply track the number of miles between fill-ups and divide by the number of gallons you burned. It’s important to calculate your MPG for all your trips because fuel economy constantly changes depending on factors that may be out of your control. Factors that may affect fuel economy include things like changes in weather, loads, routes, traffic, terrain, and road surfaces. It’s good to calculate your mpg per month, per week, and even per load. Depending on the load you’re freighting and your fuel economy, you may come to find that the decreased fuel economy is costing you more than what the load’s worth.
Once you have the mpg, calculating your CPM is pretty simple. Suppose your truck gets 6 miles per gallon and you ran 6,000 miles in a month which means you burned 1,000 gallons of diesel. If diesel averaged $3 per gallon that month, your total cost was 1,000 x $3 or $3,000. From there, your CPM will be $3,000 divided by 6,000 miles, or $0.50 per mile. If you have calculated your CPM for other expenses in your trucking operation, you might be shocked to see that fuel makes up a huge chunk of your total CPM. This is why it’s worth employing strategies to increase your fuel efficiency because it can make a significant impact to decreasing your overall CPM.
If your mpg or CPM is very high, don’t worry! That just means there are more opportunities to save. In order to improve your fuel economy, there are three things that the truck has to overcome: rolling resistance, air resistance, and gravity. Let’s explore some key things that you can do to get better fuel efficiency.
Reduce Your Average Speed
In the eyes of shippers, consignees, and others you can never deliver your load to a destination fast enough. You’ll be highly motivated and encouraged to go as fast as you legally can to get the job done. However, speed is the main culprit for increased fuel consumption and decreased profit. Experts agree that for every mile per hour driven over 60 mpgh reduces fuel economy by one-tenth of a mile per gallon.
Sure, maybe you’ll get less mpg going fast but it’ll allow you to get to your destination faster and make more money. Consider this scenario: Driver A is averaging 70 mph and Driver B is going 60 mph. Driver A is further ahead of Driver B by 10 miles, but at $4 per gallon, he spent $12.25 more to go those 10 miles in the same amount of time. You might think, “big deal, just $12.25” but it’s when you look at how much you spend over the course of the year where you really see what the impact of driving fast does to your bottom line. If you drive 130,000 miles per year and average 5.5 pmg vs 6.5 mpg because you drive faster, you will spend $12,727 more on fuel! In other words, you just gave yourself a 10-cent-per-mile pay cut.
Another way to look at it is most owner-operators net about $0.40-$0.60 per mile. If you divide the extra $12,727 fuel expense that driving faster costs by your net per mile of $0.50, you would have to drive 25,454 more per year just to pay for the extra fuel. So when you add it all up, you actually end up losing time by driving fast. Even at times when you are limited to the hours of service limits where you might logging fewer miles at 55 mph than 65, you still wouldn’t lose anything close to 25,454 miles.
Limit Idle Time
Idling, or keeping your engines running with moving, requires about a gallon of fuel per hour, which can cost you about $120 per week at $3 per gallon if you are idling eight hours a day. According to a study done by the U.S. Environmental Protection Agency, line-haul trucks that aren’t equipped with auxiliary power units might idle about 20% to 40% of the time the engine is running to power climate-control devices and sleeper compartment accessories to prevent startup problems in cold weather.
Just because idling is so common it doesn’t make it smart. Idling easily cost you a few thousands or more in just fuel alone per year and that’s not even counting the cost that comes with extra engine wear from keeping it running. In addition to the extra operating costs, many governments have no idling laws with fines as high as $25,000.
Rather than letting your engines idle, there are alternatives. Use extra blankets for cold temperatures and window screens for when it’s hot so you don’t have to use the climate controls the whole time. For $80, there are remote starters with a temperature sensor that will start the car once it reaches a certain temperature. Also, many truck stops have electrical power and auxiliary heat and air which you can use instead of running your engine. You may also opt for an auxiliary power unit that cost as little as $200 which burns less fuel while providing heating and cooling.
There are more drastic options such as investing in an idle-reduction technology. The systems vary in cost. Diesel-fired heaters are at the bottom of the price range costing about $1,000 with purchase and a year’s worth of maintenance. Fully functional diesel APUs/gensets are at the top of the price range costing up to $8,000 or more. Battery powered systems are more common and usually come in at the same price. Best way to decide on one is by having two goals in mind. First, find a system that fits your application. Second, find one that gives you a healthy return on investment.
The key to figuring out your idle-reduction needs is by keeping a detailed log of all the times you idle. Write down every time you idle and log the reasons why. Track every reason including air-conditioning, heat, AC power, warming the engine, etc. Do this for a year so you know your idling patterns as the seasons change. We recommend a year, but even if you do it for three months you can make good estimates for the other seasons. Once you have all the times you idle logged, you can figure out whether you need an APU or not. For example, if you idle only because you need heat, then a full-blown APU is overkill. In cases like that, a diesel-fired heater is less expensive and easier to maintain. If you idle to produce AC power for appliances, there are inexpensive alternatives to APUs as well. Inverters and high-capacity batteries will help power smaller appliances. Adding solar panels will help recharge the batteries and extend its use time. Bottomline, know exactly when and why you need to idle and make a calculated decision to figure out whether an APU is right for your operation or not.
Fuel Saving Tips for Trucks
There are other great practices to help you save fuel and money. Below we have listed few tactics and strategies that can help reduce your fuel by 1%-3% per year.
Watch Cash Flow
Don’t tie up your money by filling up your tank if you know that you’ll have a few days of downtime. Also, if you know a fuel station with lower prices is on your route back, don’t fill up at the more expensive stop.
Take Care With Biofuel
Biofuels tend to be more expensive and produce lower fuel mileage compared to traditional diesel. Know the level of biofuel allowed under your engine warranty and use only OEM-approved fuels. Make sure to carry extra fuel filters as biofuel can cause clogging.
Spec For Larger Fuel Tanks
Whether you’re buying a used or new truck, try to opt for larger dual tanks. This is great so you can fill up more when you find super-cheap fuel and it also helps cut down on the number of fuel stops you need to make.
Spec Your Truck Wisely
It may be tempting to choose a truck decked out in chrome with a large engine but that may not always be the best for what your business needs. There’s a big contrast between a flashy lifestyle truck and an aerodynamic truck that gets the job done. In fuel savings alone, the aerodynamic truck will offset the resale value of the stylish truck. Choosing the truck that’s right for your business will also yield greater load capacity, more comfort, less noise, and higher profit.
However, don’t let the pendulum swing too hard the other way and get a truck with too low of a horsepower rating for the application. You’ll find that you’ll be flooring every time to get the truck moving which burns more fuel in the long run. There's a way to maximize efficiency including setting the engine control module for maximum fuel economy, installing full-flow mufflers, or installing one of the several new engine/transmission combinations built for maximum mileage.
Perform Regular Maintenance
Performing regular maintenance ensures that your truck is running efficiently. Keep a close eye on your mpg at each fill as any decline in mileage may mean that there’s something wrong with the truck. Start a preventative maintenance program looking out for things such as low oil, dirty air filters, or air compressor leak.
Maintain Tire Pressure
Rolling resistance decreases your mpg. To reduce rolling resistance, check air pressure in all 18 tires and fill them up at least weekly to manufacturer’s specification. Even if the trailer belongs to your carrier, it’s still your fuel so it’s worth it to check and inflate trailer tires as necessary.
Slow Your Acceleration and Deceleration
Slowing your acceleration and deceleration are easy and effective ways to save on fuel. Slowing acceleration is especially important running on hills or in the mountains because it helps reduce the effects of gravity. Rapid acceleration may help you get going a few seconds faster but it causes premature wear on the engine, driveline, and tires along with decreasing fuel efficiency.
Don’t shift by engine sound but by observing the engine’s rpm. If you’re not sure what the sweet spot is to shift, ask your engine manufacturer.
Cut Out-of-route Miles
If you’re like many owner-operators, about 6% to 10% of miles you drive are out of route. You could potentially decrease out-of-route miles by 3%. If you do so, you can increase your fuel efficiency by 3% and improve in other areas including tires and other maintenance. Rethink your routes, keep side trips to a minimum, and use precise directions.
Getting a Fuel Surcharge
Since fuel prices increased two decades ago, carriers and their operators have used fuel surcharges to help guard against further fuel price hikes.
What is a Fuel Surcharge?
Fuel surcharge is a fee that carriers or independent owner-operators add to cover the cost of fuel needed to deliver freight. It is usually added to the freight charges on a per-mile or percentage basis.
How to Figure What a Surcharge is Worth
If you know your truck’s fuel economy, you can calculate how well a fuel surcharge compensates you for rising prices. Many carriers pay a surcharge when the national average price for diesel exceeds a certain amount. Using the weekly diesel price report published by the U.S. Department of Energy, when prices exceeds a certain price, often $1.10 to $1.25, the surcharge kicks in. The surcharge increases incrementally with diesel prices, either on a cents-per-mile basis or on a percentage of what the customer pays the carrier for the load. Carriers structure their surcharge by assuming a certain efficiency such as 6 miles per gallon. Some owner-operators turn their surcharge into a profit by being fuel efficient because they can average fuel efficiency that’s better than 6 mpg.
In more recent times, especially in the case of dedicated regional routes, surcharges are set based on regional prices or prices along specific langes. This can be both a good thing or a bad thing. The ame company that will pay extra for loads traveling only in Western states might ask for a discount on trips in other areas.
If you’re an independent owner-operator and not with a carrier, develop your own surcharges for contract rates quoted to shippers and know that most brokers negotiate all-in rates irrespective of any added surcharge. The key to setting your surcharge is to ensure that it sufficiently covers your current fuel cost with enough left over for profit.
Surcharge Figured as Per-mile
Here’s a scenario: suppose a surcharge is designed to cover increases above $1.25 and fuel costs of $2.50. Ideally, you’ll receive a surcharge covering that extra $1.25. If your truck gets 6 miles per gallon, divide the surcharge by $1.25. This will equal $0.21 cents per mile. This surcharge will allow you to break even. Now assume you actually get 7 mpg. If you do the same calculation and divide the $1.25 surcharge by 7, you only need $0.18 cents per mile to break even on fuel costs. If you’re driving for a carrier that charges based on 6 mpg surcharge, you profit $0.03 per mile.
Surcharge Figured as a Percentage
When a surcharge is a percentage of gross revenue, the calculation is similar to the per-mile method. Using the same scenario, let’s assume you get 6 miles per gallon and the cost of diesel is $2.50. In this case, you need a surcharge of 21 cents per mile to cover fuel costs. Assume you’re offered a 1,000-mile haul for $1,100 in your gross revenue. Take that surcharge target of $0.21 per mile and multiply by the miles and you’ll see that $210 is the percentage of the gross. Divide that $219 by $1,100 and you’ll get 19% which is what you need to cover the extra fuel costs.
There are no rules for what the fuel surcharge can be. If you understand how they work, it’s easy to game this to get profit from it. Because fuel surcharges are based on fuel mileage, fuel-efficient owner-operators can always beat out the national average and gain profit from the surcharges. As of now, fuel prices have remained lower than the +$4 peak we hit several years ago and fuel surcharges have been lower as a result. With that however, owner-operators can now fully top off their tank instead of making frequent fuel stops. If you’re finding yourself relying on the profits from your fuel surcharges too much, you are likely not charging enough to haul freight.
Finding the Cheapest Fuel
An effective way to buy fuel is to maximize fuel purchases in low-fuel-tax states and run mileage in those states. The International Fuel Tax Agreement between the United States and Canada facilitates the reporting, collection, and distribution of fuel, but ultimately your fuel tax bill is calculated according to where you drive. If you purchase fuel in high-tax states and drive most of your miles in states with lower fuel taxes, you will get a refund when you file your IFTA report. The only way to reduce your tax outlay is by avoiding routes in high-tax states which may not always be feasible. What you have more control over is by choosing where you buy your fuel from without considering the taxes.
Pump Price Minus Taxes = Real Cost
The key to finding out the cheapest fuel in town is by taking the pump cost and subtracting out the current federal and state fuel tax rates. Subtract the cost and find out which fuel station has the cheapest raw price. The strategy means that you buy without regard for whether you are paying more at the pump or in taxes.
What makes things more complicated is that the IFTA considers state surcharges when they calculate taxes. Indiana, Kentucky, and Virginia have per-gallon surcharges; Kentucky, New Mexico, New York and Oregon have per-mile surcharges. Some owner-operators buy only enough fuel to get through surcharge states which might work but can fire depending on the actual cost of the fuel in each state. There might be times buying more fuel in a surcharge state is more economical.
Part of smart fuel buying is keeping up with each states surcharges and taxes. Georgia, Massachusetts, and New York revise their fuel taxes quarterly, and North Carolina revises its own semi-annually.
Other fuel buying techniques depend on how your fuel taxes are managed. If you’re a leased owner-operator and your carrier handles your fuel taxes, simply just look for the cheapest fuel prices. Some carriers may charge a fee to manage fuel taxes and some pay the taxes by averaging the mileage of their entire fleet. If your carrier is averaging the mileage and you have better-than-average fuel efficiency, you’re paying more for taxes than you actually owe. Because of this, some owner-operators find it best to handle their own fuel taxes.
Whatever the case may be, a good lease will itemize all charges including your fuel taxes and how they were calculated. If your settlements do not reflect what is stated in your lease, you should ask for clarification and, if necessary, look for an alternate method of paying your taxes. That may not always be an option in your lease contract so make sure you understand how the carrier handles IFTA before signing on to drive for them.
If you choose to do it yourself, you need to get your own IFTA account to do your own fuel tax reporting or elect to use a third party service. You don’t need your own operating authority to get an IFTA account but independent owner-operators must have an account in their base plate state and be responsible for quarterly reporting.
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