1.0 INTRODUCTION

1.1 Goals and Purpose

1.2 Vehicle and Freight Configurations Investigated

1.3 Current Issues In Trucking

1.0 INTRODUCTION

1.1 Goals and Purpose

Since 1972, Transport Canada has sponsored the assembly and publication of Operating Costs of Trucks In Canada.

Initially, there was a desire to understand how standardized vehicle configuration operating costs compared between Canadian provincial and territorial regions. Later, this interest was expanded to consider the United States -- reflecting the need to understand comparative economics for trucking inside Canada's largest trade partner as well as for the significant commercial trucking links between the two countries.

By periodically updating the original study, Transport Canada has monitored trends in trucking costs. For this reason, the project has been updated -- either every one or two years -- since 1972, with results published and distributed to interested parties. The most recent prior edition was prepared for year 2003 and can be obtained from Transport Canada. Please refer to that agency's website at http://www.tc.gc.ca.

Because it aids trucking economic study, this report has been widely circulated and used by diverse groups including managers of fleets seeking unit cost performance benchmarks, shippers rationalizing their trucking costs, and consultants doing feasibility planning studies. Highway officials have used the quantified hourly and mileage truck costs to evaluate detour delay or additional routing costs or for assessing operational benefits from better route infrastructure that reduces truck delay.

This report gives the most recent study update to 2005 cost levels.

In this project, the activity based case studies reflect specific trucking situations that vary as follows. We consider:

• Operating region (province, territory, US region or trade corridor)

• Type of vehicle and commodity

• Utilization (per trip payload and annual productive distance per vehicle)

• Trip haul distance

• Comparison to owner operator trucking or rail intermodal for line haul, and

• Current industry best practices (driver, vehicle technology, travel speeds, etc).

1.2 Vehicle and Freight Configurations Investigated

Operating costs for eleven very common vehicle types are included in this report's case studies. These have been carefully selected as a representative motor carrier sector sample in terms of freight and equipment types commonly encountered in all regions of Canada. Following Figure 1 illustrates the freight equipment configurations chosen for investigation.

1.3 Current Issues In Trucking

The methodology and basic case studies investigated in 2005 conform to the most recent prior study edition -- 2003 Operating Costs of Trucks In Canada.

Since that edition, we note the following key factors that reflect in changes to truck operating costs:

• Driver Shortage -- Although a shortage of drivers has been forecast for many years, our 2005 interviews of trucking companies indicate that this situation now significantly constrains fleets when they wish to expand.

• Fuel Cost Escalation -- Since the early 1970's oil embargo, there have been periods when fuel prices have increased more significantly than general inflation in other trucking costs. In this same period, there have also been times of fuel price abatement. Following Figure 2 shows the dramatic world crude oil price rise since 2002, that has translated into trucking diesel fuel price increases and ultimately, cost increases for users of trucking services. Since world crude prices are generally benchmarked as US dollars per barrel of West Texas Intermediate Crude, the significant relative rise in value of the Canadian dollar has partially abated this effect for Canadian truckers, in comparison to fuel cost increase in the US (see reference: http://www.eia.doe.gov/emeu/international/oilprice.html , March 2005 Internet)

Figure 2: World Crude Oil Price Trends (Average Annual Basis)

(Source: US Energy Administration Published Statistics)

• Foreign Currency Adjustment -- In relation to the US Dollar, Canada's currency has revalued significantly upward since 2003. According to Bank of Canada sources (basis http://www.bankofcanada.ca/en/rates/exchange_avg_pdf.html March 2006 Internet), the annual average US to Canadian dollar ratio has dropped from 1.40146 to 1.21163. This two-year 13.5% shift impacts relative Canadian to US based truck operating costs on trade corridors, as well as many of the costs for trucking inputs traded between the two countries. The recent currency exchange trend for Operating Costs of Trucks In Canada is illustrated in following Figure 3.


Figure 3: US to Canadian Currency (Annual Exchange Rate)

(Source: Bank of Canada Published Statistics)