If you’re an owner-operator, chances are you’ve enjoyed 2021.
Stimulus money lined consumers’ pockets and many businesses got a little frothy. It was one of the longest periods of so-called easy money periods in history. If you wanted to move a lot of cargo, chances are you have the option. And with spot rates hitting all-time highs, it’s even more likely that you got paid well for doing so. Sure, fuel costs rose steadily throughout the year, but that seemed manageable. Your services were in high demand and there was a lot of loading to do.
Then came 2022, and the script flipped — quickly.
A freight market that initially looked more of the same was turned upside down in late winter and early spring. An overheated US economy sent inflation data to multi-decade highs. An attitude that the pandemic has faded has led to a return to historical norms of consumer spending between services and goods. This meant less demand for physical goods. In an effort to reduce inflation, the Federal Reserve began raising interest rates aggressively.
In the two weeks following Russia’s invasion of Ukraine, Brent Crude soared to nearly $130 a barrel, and it hasn’t traded below $100 for a significant amount of time. . For comparison, in July 2021 it was hovering around $75. This meant that fuel prices soared, which turned on the taps of inflationary pressures and quickly began to eat away at owner-operator profit margins. These headwinds led to a freight market that looked reasonably strong until it wasn’t.
In the past two years, in an effort to grab a piece of the pie, tens of thousands of new fleets of single-tractor trucks (owner-operators) have entered the market. But when that market turned earlier this year, many ended up with the bag. In May, the Federal Motor Carrier Safety Administration began reporting a record number of for-hire authority revocations, and that data is months behind schedule.
To get a clearer picture of how the world currently looks for owner-operators, we wanted to survey the FreightWaves audience. Thus, in May and June, we collected information from respondents identifying themselves as owner-operators. A total of 76 owner-operators responded to the survey.
What we learned confirmed much of what we suspected: 2021 has been a remarkable year for owner-operators, and 2022 is shaping up to be potentially dangerous. More than 80% of respondents think it will be less profitable than last year.
That doesn’t mean a bloodbath is in store for everyone. After all, 2021 has been abnormally good (average and median owner-operators in the survey reported six-figure revenues), so a slight revenue contraction wouldn’t necessarily mean bad luck. But overall, owner-operators are feeling the pressure, and it seems a safe bet that this latest market shift will shrink those less equipped to weather the storm.
We structured our email outings to specifically target owner-operators within our carrier addresses, so the vast majority of respondents said yes to being owner-operators. A total of 76 owner-operators completed the full survey.
Owner-operator respondents at the middle and median levels achieved six-figure earnings in 2021. The survey, however, revealed quite divergent data around the edges – with one owner-operator saying he brought in nearly half -million last year, and another saying they lost $20,000.
This year is shaping up to be much worse for owner-operators. Just over 35% of respondents rated their profitability expectations in 2022 (compared to 2021) at 1, the lowest possible rating. In fact, if we consider 1-5 indicating expectations for a less profitable and 6-10 year indicating expectations for a After profitable year (with a theoretical neutral between 5 and 6), 81.57% believe that they will make less money in 2022. It is an overwhelming majority who agree that the conditions are now less favorable.
The main reason for the pessimism seems to be the meteoric rise in fuel prices this year. This option scored a high weighted average of 4.61 – nearly three-quarters of respondents ranked it first. Owner-operators are much more exposed to fuel price spikes than larger carriers because they tend to have far less capital available for sophisticated fuel hedging strategies.
Rate volatility was a distant second, with a weighted average of 3.67. It was followed by the availability of fillers (3.04). Tolls and traffic, meanwhile, were by far the fourth and fifth picks.
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