EVEN BEFORE THE RECENT hurricanes, waste haulers had been burdened for a while by rising fuel prices. With the cost of fuel nearly doubling only a year or so after steel price spikes raised the cost of buying new trucks and other equipment, haulers have been forced to review the way they buy and conserve fuel, as well as consider adding fuel surcharges to their customers' bills.
How have rising oil prices affected waste haulers? At Cincinnati-based Rumpke Consolidated Cos., operating costs have surged as much as 35 percent over budget estimates for the year, says Amanda Pratt, a Rumpke spokesperson.
Pratt notes that higher fuel prices are only one factor affecting the increased cost of operations. All petroleum-based products, such as engine oils and tires, have spiraled up, including petroleum-based plastic — used in recycling bins — which has increased in price by 10 percent to 30 percent. The cost of truck parts has jumped significantly, along with the price of natural gas and electricity used to heat and cool company offices.
What measures can a waste company take to counter higher costs? “Before we raise prices, we make sure we're operating as efficiently as possible,” says David Peck, fleet manager with Waste Industries USA, Raleigh, N.C.
The firm's conservation measures now limit top road speeds to 65 mph, a step that Waste Industries says will improve fuel mileage by 12 percent and more for trucks on the highway. The company also has altered idle controls to shut off truck engines after they have idled for 15 minutes. “Our most effective conservation measure is route optimization,” Peck says. “Last year, our routing staff saved over 700 truck days — about two full-time trucks.”
Part of Ft. Lauderdale, Fla.-based Republic Services' strategy to trim costs focuses on buying fuel. “We regularly buy fuel under hedge contracts,” says Will Flower, Republic's vice president of communications. “During 2005, about 15 percent of our fuel purchases were bought this way. Now that prices have gone so high, we'll have to re-evaluate the fuel markets before entering into new contracts.”
Some in the industry feel that neither conservation nor financial strategies will overcome this year's fuel price increases, leaving surcharges to finish the job. “Most of our members have been forced to use fuel surcharges,” says Bruce Parker, president and CEO of the Washington-based National Solid Wastes Management Association. Rumpke, Waste Industries, Republic Services and others, such as Houston-based Waste Management (WM), all report using surcharges.
WM recently revamped its surcharge to deal with the widening impact of higher prices. “We now capture the fuel component of third-party haulers,” says WM spokesperson Lynn C. Brown. “We have also reduced the lag time between fuel price hikes and an increase in the surcharge.” No matter which way you look at it, Parker says, “fuel is a large component of the cost of garbage disposal.”