I’ve talked to drivers in these articles before about how much it costs to maintain trucks as an owner/operator. Companies shell out $170,000 just to buy the initial truck. Thenthey shell out another $180,000 just to keep it going. This price can be as high as $200,000 or $250,000 in the oil industry. The increase of cost comes from the specialization. Most drivers do not have a Tanker or HAZMAT endorsement, both of which are required to haul fuel or crude oil. A majority of trucks do not require chemical cleaners, which the DOT requires for many HAZMAT loads.
Today, I want to talk to business owners about how much they need to produce in order to make back money on their investments in their truck fleet.
The Math of Oil Trucking
It’s very difficult to find specialized statistics on an individual field. But I’ve done what I can to find accurate indicators. A new truck and trailer will cost you around $170,000. The ongoing costs of operating a tanker in the oil field can be as much as $250,000. I think the average is probably closer to $200,000. Therefore, in order to break even on an investment in your truck, you’re expecting it to land you $370,000-$400,000 total.
Let’s use the low end of that. An average tanker load has between 170 and 190 bbls. The max capacity is about 200. Most states, however, restrict drivers from filling it up all the way. Not to mention that trucking tools like bulkheads or baffles can lower the max capacity as well. 180 seems like a solid average, so we’ll go with that. In order for a truck to make $370,000 in a year, it has to make 30 loads in a year.
I work often with Midland and Odessa oil companies. Now, where oil goes after a company drills it is going to depend on where they can refine it. As with the pipelines, big companies own and/or lease space at most refineries. There are a number in the Baytown area in Texas, a few in West Texas, a bunch in Oklahoma, Louisiana, and California. I’ve chosen the average distance of 520 miles, since the Southeast Houston area and Oklahoma are about that far.
(As a side note, those two locations are easily the friendliest. Anything in California, Louisiana, or even Canada will be even less efficient. A driver can make it to Tulsa or Houston in a day, but probably not California or Northern Utah. Unless they are madmen.)
According to the Department of Energy, a Class 8 Truck (the vast majority of oil-hauling trucks) averages 70,000 miles in a year. If the average trip for a company, from well to out of town refinery, is 520 miles, the average number of loads that a driver will bring is around 135. This is probably good news for most companies, since they only need 30 to break even on their investment in the truck.
The Math I Won’t Show
The problem here comes from two things. First, his assumes that the oil will sell for the WTI average (which was roughly $70/bbl in 2018). Secondly, it assumes that there are no other costs associated with any given load. Neither of these things is true.
The price of oil changes all the time. If the price of oil increases, it is safe to assume that the costs of maintaining a fleet of trucks will also change. Similarly, the costs of operating an oil well change often, too. In order to drill, most companies pay millions just for the land. By the time they’ve built wells and storage tanks, and hired people to manage them, they’ve spent millions of dollars.
Make the Most of Your Trucking
The biggest point I’m trying to make here is that an inactive truck is wasted money. Given the driving shortage, companies can spend weeks wasting money before finding a driver. Since most companies replace their trucks every 18 months or so, the window for your truck to make money is very, very slim.
While this articles deals primarily with the oil industry, I should add that the same principles apply to other industries as well. In Houston, for example, even if you don’t haul oil, you are likely hauling fuel or chemicals that deal with the oil industry. And even when you aren’t, if the cost of gasoline rises, so does the cost of keeping up your trucking fleet.
Now, it wouldn’t rightly be a UES Solutions blog if I didn’t try to convince you that we were worth your time. You can spend thousands of dollars a month trying to find guys to man your trucks through sites like Indeed, Monster, or Glassdoor. But keep in mind that this not only requires you to pay for the posting; it requires your HR guys to serve as recruiter. That’s where we step in. In running a business, you and your HR team have 101 things you’ve got to get done in any given day.
UES Solutions guarantees high-quality resumes for open trucking positions within two weeks. Our drivers have lower turnover rates than industry standard, and we send your applicants molded to the specific needs of your company. That means your trucks can stop placing your money in the waste bin and start producing for you sooner than later.
That’s all I got for today!
Happy trucking everyone!