Say you're driving down the interstate at a nice, conservative speed and a semi goes blowing by you. Is it more likely to be a company-owned truck or an owner-operator?
With the rising cost of diesel fuel, it may be more likely to be a company-owned truck. Why? Well, it's all about incentives. Driving more slowly is more fuel efficient (Associated Press article here), but drivers of company-owned trucks don't pay for the fuel so they have little incentive to economize on fuel costs. Owner-operators, on the other hand, pay fuel costs directly so they slow down to increase efficiency.
Bonus question: how do trucking companies that recognize this incentive conflict overcome it?
Many install speed governors on their trucks, which limit the maximum speed the truck can attain (and, yes, I know this tends to make the prediction at the beginning of this post much more difficult to make, but give me some dramatic license here).
I was reading where it says -drivers of company-owned trucks don't pay for the fuel so they have little incentive to economize on fuel costs. Well they should because what happens if the company goes bust over debt incurred through insensitive drivers (fuel) and they have no job.
ReplyDeleteThen there's the incentive, perhaps larger for owner-operators (but this would depend on the details of the compensation systems), to drive more miles. (This assumes that compensation is a fixed per-mile amount for owner-operators.) Then there's a trade-off between speed (and miles) and fuel costs. In this case, rising fuel costs change the balance of that trade-off, at least in the short-run, in favor of fuel conservation. However, re-negotiation of the per-mile compensation rate can swing things back in favor of higher speeds.
ReplyDeleteNot directly germane to the original post, but tangentially related, this story from today's (3/25) Chicago Tribune:
ReplyDeletehttp://www.chicagotribune.com/business/chi-tue-trucks-repo-diesel-mar25,0,3589923.story
Driven to the end of the road:
As opportunities to haul freight shrink with the declining U.S. economy, and diesel costs soar, independent truckers are fast becoming a vanishing breed