Surging oil prices could bring catastrophic bankruptcy rates to trucking within nine months, according to a stock analyst who has studied the historic correlation between changes in fuel prices and company failures.
Transport Topics
Trucking bankruptcies (in blue) tend to trail oil price hikes (red) by six to nine months. (Click the graph to see a larger version)
Throughout the 1990s, the rate of trucking company failures followed the price of crude oil, but with a six- to nine-month lag, said Donald Broughton of A.G. Edwards & Sons in St. Louis. He believes that if this correlation holds through the current run-up in prices, it could be devastating to the industry.
Crude oil prices — which eventually become diesel fuel prices — bottomed out in the fall of 1998 at an average for the quarter of $12.57 a barrel. From December 1998 through February 1999 the national average price of diesel was less than $1 a gallon, according to the Department of Energy. One year later, in the fourth quarter of 1999, 280 trucking companies failed, a relatively low number for a three-month period.
That, however, was the lull before the storm.
For the full story, see the Sept. 11 print edition of Transport Topics. .
