Diesel Hits Record High, Driver Pay Up 50%

Diesel prices soaring to new highs, driver pay increasing, and operating costs up 40-50% since 2019 are reshaping the freight landscape. David Parker of Covenant Logistics Group joins us to break down the latest SONAR data, discussing everything from tight drayage capacity to the surprising impact of NIMBYism on data center growth and its implications for the supply chain. Discover whether the trucking industry is truly in a “Goldilocks” environment heading into Q4, or if new challenges are on the horizon.

Diesel prices have climbed to an all-time record of $6.53 per gallon, compounding a cost crisis for trucking companies that are already absorbing significant fuel expenses outside their surcharge recovery programs, according to David Parker, founder and CEO of Covenant Logistics, speaking at a FreightWaves studio interview in Chattanooga.

Parker said Covenant Logistics purchases roughly 45 million gallons of fuel per year but recovers only about 80% of those costs through fuel surcharges. Idle time, out-of-route miles, and deadhead trips account for the unrecovered 20%, effectively erasing the margin that carriers once made on fuel. “I’m not saying if you had no idle time, no deadhead, if you had none of those issues, you could break even and make some money,” he said.

The fuel burden is one piece of a broader cost squeeze. Parker said non-fuel operating costs — including driver pay, health insurance, liability insurance, and physical damage coverage — have risen between 40% and 50% since 2019, while contract rates have not kept pace. “Since 2019, operating costs are up between 40 and 50%. My rates are not up 50% since 2019,” he said.

“The only thing I don’t feel bullish about is the operating costs. That we gotta do better, all of us, the whole industry does.” — David Parker, Covenant Logistics Group founder and CEO

On the capacity side, driver pay is rising rapidly, and Parker said the company is securing drivers as a result. He described drayage as one of the tightest pockets of the market, echoing remarks from JB Hunt about difficulty finding drayage capacity. Tender rejections stand at 13.74%, up from roughly 5.5% at the same point last year and compared to a year-end reading of 10.4%, which FreightWaves’ Craig Fuller characterized as indicative of a still-tight market despite being below the 17% peaks seen earlier in the cycle.

Spot rates are running around $3.50 per mile, up approximately 80 to 90 cents from a year ago. Parker noted that contract rates have recently begun surpassing spot rates, which she called a normal and healthy sign. He said his company’s rates are up double digits and expects that trend to continue into the fourth quarter, even as peak season demand signals have been mixed. Shippers began securing peak capacity earlier than ever — a pattern she said mirrors what Knight-Swift reported earlier in the year.

Parker expressed measured optimism heading into year-end, citing healthy tender rejection levels and strong demand from discount retail. He flagged insurance costs as a major unresolved risk, saying there is “no telling” where liability and physical damage premiums will ultimately settle. With new engine regulations on the horizon and OEMs signaling they may pay regulatory fines rather than absorb compliance costs, she warned the industry that additional expense pressure is coming and that rates will need to rise further to keep carriers solvent.

• Diesel reached a record $6.53/gallon; Covenant Logistics recovers only ~80% of fuel costs through surcharges on 45 million gallons purchased annually.
• Non-fuel operating costs are up 40–50% since 2019, driven by driver pay, health insurance, liability insurance, and physical damage coverage.
• Tender rejections sit at 13.74% vs. ~5.5% a year ago, with spot rates near $3.50/mile — up 80–90 cents year over year — and contract rates now surpassing spot rates.

This Summary is generated thanks to a transcription of the interview, for the full interview please enjoy the video above.