Speaker 1 [0:00] Talking about jobs, John Kingston, how you doing, sir?

Speaker 2 [0:04] Not bad, yourself? Doing well.

Speaker 1 [0:07] So let’s talk about the jobs market right now. You are, have been reporting on the jobs market. Tell us, what does it look like in overall jobs and in freight specifically?

Speaker 2 [0:16] Boring, very boring this month. Jobs in truck transportation were up 100 jobs, that’s it. And they, and after all the machinations of the past few months, the number of jobs out there is the same as it was in February. So truck transportation jobs, and remember, that’s an independent owner-operator is not in there. Okay. So I want to make that point, but the number of truck transportation jobs surveyed by the BLS has really, I mean, it’s gone up and down, but it’s where it is. And it’s where it was in July, the same place it was in February. And it’s down from last year.

Speaker 1 [0:48] By the way, John, I think that’s super encouraging because the fear has been, we’ve talked about it frequently on the show, Dr. Miller, Jason Miller, who was on the show a couple of weeks ago, talked about the fact that he believed that fleets were going to overcorrect and hire too many drivers, as they tend to do in these upcycles. It’s not happening. That’s not what the data says. Now, you mentioned the BLS data does not have owner-operators, something we’ve talked about before. But owner-operators are not— I mean, there is a lot of pressure on owner-operators right now in the market because of the regulatory compliance elements. But really, there isn’t a case to be made that the larger fleets are adding trucks according to this data.

Speaker 2 [1:27] Yeah, I mean, I, I would imagine if you really dove into the data and looked over years’ worth, there’s probably got to be some correlation between the number of truck transportation jobs and the number of owner-operators out there, independent owner-operators out there, just because they’re serving the same market. So at a certain point, if you’ve got a really strong market, you’re going to hire more types of jobs that will be reflected in the data, and probably the number of independent owner-operators goes up too. And then conversely the other way as well. So I wouldn’t imagine that there’s a big divergence. in the direction of the numbers between people who are, let’s say, W-2 workers that can get surveyed by the BLS and those who are out on their own.

Speaker 1 [2:06] I think this is great. I’m glad that the industry is not overcorrecting. Like I said, it’s something that the industry has known to do is overcorrect, and it’s encouraging that the cycle may live on longer. We’ve talked about it being a supercycle. Again, I think this is Exhibit A of why we will have a longer cycle. Let’s move on to oil. Tell us a little bit about the state of Hormuz. What are we hearing? What is happening? What’s moving? What’s not moving right now, John?

Speaker 2 [2:33] Well, I think what’s really notable is that whenever there’s a hint that there’s going to be some progress, the market really— you talked about overcorrecting. I won’t say they overcorrect, but they react very strongly to that, more than they do for prospects of nothing happening. So over the weekend, when there were suggestions that maybe we were moving toward a deal, The market, the first couple of days of this week really sold off. The past couple of days, it’s been up. Right now, if it settled right now— let’s say I’m just— when I say it, I mean I’m talking about the price of ultra-low sulfur diesel on CME. If it settled right now where it was, it’d be up about $0.12 in 2 days. So you can see it’s corrected upward as the prospect for peace that we got all excited about over the weekend is starting to fizzle out. But $0.12 is less than a drop. So people, traders just do not want to be caught short if suddenly there’s peace in our time, and they don’t want to be on the wrong side of that trade. So they react rather vehemently to any prospect that maybe this is coming to some sort of end, which, as we know, it really isn’t. Hopefully, it will soon. But the numbers that are going through the straight-up home moves have not shown any significant increase over the last several days.

Speaker 1 [3:47] Now, John, are they biased to the downside? It sounds like they are not, as you talked about, not wanting to be caught. Anytime there’s news of resolution, it looks like they are responding to that, and that’s keeping a lid on oil. Is your view that really as soon as there is true belief and conviction of a resolution, that we’ll see oil prices drop?

Speaker 2 [4:11] I would think in the beginning it would drop, but as you know, I’ve really been pretty consistent. And when I look at the numbers, when I look at the loss of production, the loss of refining capacity, that’s been damaged and is going to take a long time to get fixed. I still think we are facing some resolution— what’s the word I’m looking for, but some resolution that’s going to be bullish. I just still don’t think—

Speaker 1 [4:37] You think price of oil and therefore diesel at some point going to go up? What’s our crack spread, John?

Speaker 2 [4:42] It’s still about, depending on how you measure it, it’s still about $1.75 or something like that. The other thing too is diesel. Diesel on CME compared to gasoline is now like a buck. And that’s incredible. I went back to see when was the last time that diesel was under gasoline. It wasn’t that long ago. It was like spring of 2025. But now that spread is gigantic. And a lot of that is not Middle East. A lot of that is Russia, Ukraine’s ability to continue striking the Russian refining sector, which is very heavily oriented toward making diesel is really having an impact. Remember, it’s one big global market. So the fact that the US does not really consume Russian diesel, or if it does, it’s a very small amount, does not matter. It’s all one big connected waterbed, as I always give my age by talking about a waterbed. But I just can’t help— I love that analogy. You know, a waterbed, if you push it down on one end, the water moves throughout the whole waterbed. That’s kind of like all the diesel market is. Don, you’re dating yourself.

Speaker 1 [5:44] Have you been in a waterbed?

Speaker 2 [5:45] I know I have.

Speaker 3 [5:46] I remember when I was little, people having waterbeds.

Speaker 1 [5:48] They had waterbeds. They were cool in the ’70s and ’80s, I think. I mean, as a kid, you wanted a waterbed until you realized they were really uncomfortable.

Speaker 3 [5:54] Oh my gosh.

Speaker 2 [5:55] I had a fraternity brother who actually slept in one in the fraternity house.

Speaker 1 [5:58] Yeah, really, really kind of nasty after a while, the waterbeds. So, John, real quick on Russia, Ukraine. I mean, it looks like there’s some momentum. The Ukrainians are blowing up these logistics warehouses. across, they’re also blowing up refineries. I mean, in your perspective, I know you’re not a military reporter, but are we seeing, is there a belief in the financial markets and oil markets that Ukraine’s got the upper hand here? Do we believe that there’s gonna continue to be pressure on energy prices related to the Ukraine conflict?

Speaker 2 [6:35] Well, I think that’s what you’ve seen in the diesel price. I mean, you’re not talking about a significant loss of upstream production of Russian production, which has not really been getting hit that much. What’s been getting hit are refineries, and those refineries are constructed to maximize diesel output. So I think that is what you’re seeing here in that spread. The spread on diesel, I think, is only partly related to what’s going on in the Middle East. I think it’s a Russian story. And so yes, in that sense, I think that what’s going on with the price of diesel is very much related to Russia-Ukraine, more so than the Middle East.

Speaker 1 [7:10] Julie, do you watch any of these videos of these like warehouses in Russia being blown up?

Speaker 3 [7:16] No, I mean, I haven’t.

Speaker 1 [7:18] These are like the equivalents of Amazon and the Ukrainians are just, I think they’ve blown up something like 15 so far and there’s only like 40 of them in the entire country that are of the scale they are. It’s absolutely breathtaking across. You can see it on X.

Speaker 2 [7:34] They’re only less scary than the videos you see of these poor people out there naked, whether they’re soldiers or there’s a civilian. There was one of a Ukrainian civilian, he was like a fruit stand seller being chased around by a drone. I mean, the outcome of that is inevitable.

Speaker 1 [7:52] Yeah, it’s really sad. It’s sad the amount of civilian casualties that are related to this conflict. So, So, John, let’s talk a little bit about this Penske lawsuit. Julie, you’ve got some thoughts here.

Speaker 3 [8:04] Yeah. So Cramer’s Slippery Lane, right? I know you’ve been tracking this story and Penske getting pulled back into the lawsuit, not just as a reversal of them being dismissed, but then the vicarious liability angle as well. Do you want to give us some details?

Speaker 2 [8:20] So, I mean, this is sort of a classic case of of a, you know, a fatal crash in Texas in 2018. So remember, you can’t just talk about Penske because Penske’s got multiple companies by that name. They’re all, you know, interwoven and entangled. So Penske Logistics is primarily a carrier. It has a brokerage arm called Penske Transportation, uh, PTM, probably. Um, Jordan Blank, what did I have it as?

Speaker 3 [8:48] Probably if it’s PTM, I would guess it’s Penske Transportation Management.

Speaker 2 [8:53] Yeah, right. Yes, thank you. Thank you. Okay, so, so, uh, when this case first went to trial, 2 things happened. There was summary judgment issued in favor of Penske Logistics, the carrier, on the grounds that it was not the employer of the driver. This, this load from an automotive seat manufacturer got— I won’t say double brokered, but it got moved down the chain twice. Penske Transportation— Penske Logistics got the job. Brogage arm PTM, which gave it to a carrier, which then gave it to another carrier, and it was that carrier whose driver was involved in the jackknife accident that ended up killing somebody. So the carrier, Penske Logistics, was— the move to have them found as the vicarious employer of the driver that jackknifed was unsuccessful, and summary judgment was passed down in the Southern District of Texas. In favor of Penske Logistics. Penske Transportation Management was tossed out of the case under the grounds that the F4A protected it. Of course, the F4A as a protection against brokers went away with Montgomery. So the appellate court, the Fifth Circuit, took it up and they did 2 things. First of all, this is no surprise at all, Penske Transportation Management was kind of put back in the case. Why? Because Montgomery said You can’t do this. Okay, brokers are not being protected by the safety exception in the— in the— or actually, brokers can be pulled in under the safety exception of F4A. And then you also had another decision that reversed the summary judgment on Penske Logistics, the carrier, in which the— in which the court said, yes, they can be found to be vicariously liable for a— for the carrier down the line. They haven’t taken on the responsibility of that load. and then passing it down. So it was a double whammy loss for Penske in this case. And, you know, we’re gonna watch it. There’s gonna be a lot of others, I would imagine, that where a broker was protected and now it’s gonna get put back in and it’s gonna— and the litigation will go like back to the federal district court. And we’ll just kind of watch that.

Speaker 1 [10:58] So much here.

Speaker 3 [10:59] Yeah.

Speaker 1 [10:59] There’s Texas, which has been sort of the epicenter of, you know, the Lupus lawsuit was litigated in Texas, actually. The accident happened in Mississippi, but it was Dallas County. You’ve got Texas. It’s featured— the Warner case was a Texas lawsuit. The Home Depot case that involved Warner was a Texas lawsuit. So Texas is front and center. The idea that Texas is only a business-friendly state is not being proven out in the court systems unless you get to the state Supreme Court. Feels like the state Supreme Court tends to be very, um, call it pro-business, or at least, uh, tends to side on the argument that businesses’ liability is mitigated, which is, I think, encouraging for businesses. But the other idea is that this law— and we were talking about this before we got on air, Julie and I were— is that the parties— there was multiple parties that were passed on. This was not even double-brokered, it was quadruple-brokered, I guess you could describe it. One went from a managed trans business, which is Penske’s sort of core business, to their brokerage arm, then to a carrier.

Speaker 3 [11:58] I Yeah, let’s walk through that chain one more time because I think it’s really interesting. So it was first tendered to Penske Logistics, which is really like their asset. I mean, it’s their trucks, right, as a trucking company, which is why—

Speaker 1 [12:08] Is it the trucking company or is it Managed Trans?

Speaker 3 [12:11] It went from them to their Managed Trans.

Speaker 1 [12:13] Gotcha.

Speaker 3 [12:13] So which is why this whole vicarious liability part was so interesting, because they said that they assumed control and responsibility for the freight. So then the underlying carrier can be considered an employee, right? So it went from Penske Logistics, where it was actually tendered to, to PTM, which is the managed trans, their broker, their, their, um, then to Liberty Lane, who then brokered it to OK Trans, who was involved in the accident.

Speaker 1 [12:42] Go ahead, John.

Speaker 2 [12:42] No, I was gonna say to OK Trans. Yeah.

Speaker 1 [12:45] So, so the question is, if you’re Penske, were you aware, was there awareness at Penske that this was being brokered and brokered and brokered, or was this a a failure in the chain of a carrier that was supposed to have received the load and hauled the load, double brokering, as we know that people are prone to do?

Speaker 2 [13:07] Well, what I— okay, based on— remember something, the decision by the Fifth Circuit Court of Appeals was a grand total of 6 pages, okay? So there’s not a lot of discussion in there, but I would imagine, based on my reading of what’s in there, I think the argument of, hey, we didn’t know this was going on, would probably not stand up in court too well.

Speaker 1 [13:29] Why is that?

Speaker 2 [13:30] The argument— well, because the court made the argument—

Speaker 1 [13:32] why would you say that? Like, what makes you say that?

Speaker 2 [13:35] Because the court makes clear that when— and I spoke to Mark Blubaw of Benesh, and he said this really is a— this is not groundbreaking. This is an accepted part of law that when a carrier takes on a load, as it moves down the chain, it still has responsibility. It does not wipe its hands of it. So even if it didn’t know that it was getting rebrokered From what was that middle one? What lane? Liberty Lane. Yeah. Yeah. From them to OK Trans, the fact that they may not have known about it, based on my thin reading of what the judge said, I don’t think that’s going to make any difference. Wow.

Speaker 1 [14:14] That’s a nice.

Speaker 3 [14:14] And I think the interesting, the other interesting differentiator here is.

Speaker 2 [14:18] Sorry. As long as we’re talking about the week, let’s not forget in Texas. that there was another case involving Atlas Freight, um, this week in Texas where the, uh, the plaintiffs tried to bring them in as a shipper liability and they were shot down. Now that’s the second time in Texas that shipper liability took a blow. The first one was, Craig, you made reference to Home Depot. There was that one and then there was this one. So that’s another— That was an air freight here.

Speaker 1 [14:45] The Atlas Air, as I understand it, John, was an air freight, the air freight operations, right?

Speaker 2 [14:51] Yeah, so anyway, that was one where the trying to extend liability out, uh, did not work.

Speaker 1 [14:56] There was definitely— Supreme Court has ruled multiple times, has been, like I said, they’ve been pro-business, you could argue. Um, they have not had a ton of, um, activism in terms of their allowing these jury awards if you get to appeal, which I think is encouraging, as long as the appeals court, uh, continues and the, the Supreme Court continues to be You know, have have the same representation in terms of of you know judges. I I think the question is going to be what states? I mean these these issues, and you were talking about interesting point. If the broker loses, so if the load is brokered to a carrier, so they think, and that carrier elects to broker it, to your point, John. Chain of custody. You may lose custody as to who the counterparty is, but you’re still responsible, which I think is—I mean—it’s news to me.

Speaker 3 [15:52] I wonder if one of the differentiators here is that it was a carrier who received the load, not a broker. Like in the C.H. Robinson case, it was a broker, and they said that the underlying employee of the carrier was still employed by them. In this case. The vicarious liability is because they were a carrier who received responsibility of the freight. So I don’t know if that distinction of them being a carrier before they gave it off to their brokerage counterpart.

Speaker 1 [16:21] The managed trends business should give them some degree of. I don’t know. We’ll get into it, Matt Leffler, and later in the show, John. Thank you so much, man. We’ll be back.

Speaker 1 [0:00] Speaking of double brokering and the fraud that continues to propagate this industry, there’s no better person to talk about than Mark Hazelwood, who is on an absolute tear right now. Mark, let’s start with, uh, really what you’re up to. Uh, last time we talked, there’s a lot going on in your life. Uh, what, what is the latest, uh, with you, sir?

Speaker 2 [0:20] Well, first of all, uh, Julie and Craig, thank you for having me. I really appreciate the opportunity and, uh, several things. One of the things that we’ve really been focused on over the last year is really working on the non-domiciled driver and what the non-domiciled driver is doing and has done to the industry really over the last, you know, 7, 8 years since the ELD has come into play. But it’s really expanded itself in the previous administration. And really changed the dynamics of the trucking industry because of the amount of miles that these non-domiciled drivers are driving. And when you look at it, you know, they’re driving 145,000-150,000 miles a year to where a driver doing it legally and doing it by the hours of service can maybe get 92,000, 94,000, really good, maybe 96,000 miles a year. So that’s kind of what we’ve been focused on with the administration. And the administration, I think, is doing a stellar job of looking at all of the different aspects that these non-domicileds, you know, have come in and just manipulated the industry.

Speaker 1 [1:45] So, Mark, you’ve got 3 titles. You’ve got your chairman of Conversion Interactive, Echo Flaps, and Assured Telematics. Can we work through each of those, exactly what each of these do, for those— for our audience who maybe isn’t familiar with them? So let’s start with Conversion Interactive.

Speaker 2 [2:00] Yeah, first, Conversion Interactive, uh, uh, is a company. We are the largest, uh, driver recruiting agency. And not just an agency, we’re more technology than we are agency, uh, in today’s world. And, uh, uh, Joanne, my wife, and I own that with Kelly Walkup. And we have worked diligently to develop Agentic, which is an AI development, and really had some great success with recruiting drivers. And it’s a tough market, and it has turned on a dime. It went from, you know, companies not needing drivers to where today, as As you were talking about earlier, Julie, rates are definitely on the upswing and are going to continue that way as capacity leaves the market. And good capacity is there, but drivers are in high demand. So that’s what we do in conversion.

Speaker 1 [2:59] And Mark, are we seeing the driver market, you know, something we were talking about, the labor situation, concern about the market overcorrecting? You’ve been around this industry for your whole life. Do we think this industry is going to be able to hold off of its temptation to overcorrect?

Speaker 2 [3:18] I believe so. And I think for the first time you’re seeing real capacity leave the market to where, as Julie was talking earlier, you don’t see capacity entering the market. Typically, when you have rate increases like what we’ve seen over the last, let’s call it 5, 6 months, You typically have, and John was talking about this too, carriers adding trucks, adding equipment. I think from a capacity standpoint and from just a driver standpoint, I think it’s a little tough for the carriers to add capacity due to the limitation of drivers. I do think this though, as you get back to where carriers will find that the return is there, they will invest in equipment and invest in drivers and invest in making sure that the supply chain is not disrupted.

Speaker 3 [4:12] So I do want to talk about your other 2 jobs, but while we’re on this topic, I want to keep talking about capacity exiting the market. And you play a personal role and devote your time to enforcement and to, I guess, championing these causes towards pulling pulling unsafe capacity off of our roads. Can you talk a little bit more about that and what you are doing with FMCSA and DOT and how that all plays together?

Speaker 2 [4:37] Sure, we’ve had a meeting with carriers and with the ATA with Secretary Duffy and Administrator Barrs back in December. It was really an important meeting, but it was very constructive, and you can tell that they understand the issues and they’re having tremendous success looking at the industry. And I say this, that they had to have success because the previous administration had been so bad. And actually, I think it was by design to bring so much capacity into the market. And they did so by, you know, Having the CDL mills, you know, fast-track CDLs in the schools, you know, not, not actually training drivers. And it just added so much capacity. If you look, when President Trump left office in January of ’20, there were about 170,000 non-domiciled CDL holders. Don’t know how many of those were driving, but they were holders. When President Trump came back in, in January of 2025, there’s 780,000 non-domiciled CDL holders. So you can see the amount of CDLs that have been issued during the previous administration. And most of those came into the marketplace, and it wasn’t because the marketplace was, as you, as both of you know, uh, that you saw rate increases during that point in time. But how, why were they coming into the market? They were coming into the market because they were manipulating, uh, the ability to, the miles they run, the insurance they carry, everything that they did, uh, they were, they were manipulating I’m not going to— I’m not going to use another word. I’ll use manipulation. But they were manipulating the market to benefit themselves.

Speaker 3 [6:49] So speaking of the number of illegal CDLs, I mean, I think the numbers reported are that Duffy’s team’s taken out more than 20,000 drivers out of service and 28,000 illegal CDLs. That’s not enough to move the market and actually take capacity out of the market. But is it the threat of the enforcement?

Speaker 1 [7:07] No, it’s John Kingston who— and Mark knows this. Probably painfully, he’s bought enough fuel and oil in his life. It’s the incremental barrel that sets the price of the oil.

Speaker 2 [7:19] Like, at the end of the day, is it enough to change the market?

Speaker 3 [7:22] And what do you think it will look like the rest of the year?

Speaker 1 [7:24] Look, we have reported on the fact that capacity has come out. That’s the reason that this recovery is underway. It doesn’t take a lot. It’s the incremental. I mean, Mark, John Kingston, our oil reporter, has been reporting on commodities his whole life. He likes to say it’s not the percentage, it’s the incremental that sets the price of oil. I would argue that truck driver capacity is the same thing. Truck is a commodity. You disagree with that?

Speaker 2 [7:51] No, 1,000%. Every driver that comes out, and really when you take one driver out, Julie, to your point, you’re taking 1.5 out because that driver that you’re taking out, that non-domiciled, has probably run 140,000 to 150,000 miles. Versus versus running 92,000 miles—that’s a major difference. And as the this administration continues to focus on how do these drivers, how do these carriers, how do they manipulate the market? Well, they manipulate it by manipulating their ELD. And you look in this country. There are about 1,020 ELD providers, and it’s all because we have self-certification on the ELD. This administration is going to change that, and they’re going to get a third-party certification. To put that into perspective, Canada has third-party certification, and they have been in the ELD and the certification since 2019. They have 42 providers in Canada. 1,020 versus 42. Why are there 1,020 here? Because in self-certification, it’s like grading your own papers. Guess what? You’re self-certified. You’re now an ELD provider. And so there was a lot of demand for these ELDs, and especially for those that would allow the drivers and/or the companies to manipulate those ELDs so the driver can drive more. But the problem with that is this: they’re killing people. They’re killing people. And you had— you have innocent Americans on the highway, and they’re driving in Florida, California, wherever, Indiana, Pennsylvania, where a state trooper was killed, and they’re being killed by these illegals driving trucks that have not been trained to drive trucks. They haven’t been put through certified schools and they’ve been given a CDL within 2 to 3 days. And in the schooling, self-certification again. We’ve got to get the third-party certification in schools and on ELDs.

Speaker 1 [10:09] Well, I mean, it’s— I mean, as you point out, a lot of these ELD companies are actually based overseas. They’re editing the software. We’ve reported numerous cases where these Chameleon carrier networks happen to own the ELD devices that these chameleon operators are using. And as soon as they get shut down, they just recertify under a different name, software copy paste, real simple. It’s a massive hole. Derek Barr has been totally on this, top cop in the industry, trying to crack down on this, Mark. What are your— in terms of timeline, what are you hearing?

Speaker 2 [10:45] You know, it’s going to take a while, and I don’t know when they will announce that they’re going to third-party certification. I would hope it’s going to be sooner versus later because I think that will wake up those that are manipulating the ELDs. So I do think that they will announce it sooner versus later. But then getting to the point where you actually go through the certification, It— you have to find those that are going to certify. And so the FMCSA will have to find certification process, get through the process, and then have those that are going to be hired to do the certification. And then you have to allow the ELD providers to go through that certification. And, you know, that’s going to take a while. My guess is if we could get that done over the next 12 months, I think it would be a heroic act to get it done in 12 months. I do think this, as you announce and as you start going to certification, I think there’ll be a lot of the ELD providers that have been out there allowing these drivers and companies to manipulate. I think they will leave the market because they know it is coming and they won’t spend the money. And it’s going to be expensive. It’s going to be expensive for me, for our company. to go through this certification. We spent millions of dollars getting certified in Canada. We were the first to be certified in Canada with our ELD, and we know we’re going to spend a whole lot of money to get there, but it has to happen. It has to happen in this industry. It’s got to happen. We can’t have, you know, self-certification on something as important as an ELD.

Speaker 1 [12:35] Yeah, I mean, Derek Barrs and Duffy have so much work to do to clean up the travesty, the economic security and safety crisis that this trucking industry has become, which is quite— it’s quite fortunate that we have an administration and a cabinet secretary that cares about the state of trucking. It’s interesting, when Sean Duffy was first appointed DOT secretary, we had that major air crash up in Washington, DC. It was the first sort of commercial crash that we’d had in over a decade.

Speaker 3 [13:04] And that was like immediately.

Speaker 1 [13:05] It was immediately. It was right at the end of January. I believe. And all the attention was on that. There was a period of time on X where the FreightX folks, the trucking folks were saying, hey, it’s more of the same. Duffy doesn’t really care about trucking. But then there was a lot of fast and furious come May. I mean, it has been almost daily, or certainly every couple of days when we hear Duffy talk about trucking. We’ve never seen a DOT secretary do that. It made it into the State of Union address, probably the first time. Mark, do you ever remember a president talking about trucking during the State of the Union? I certainly don’t.

Speaker 2 [13:40] Never. And when we had our meeting in December, uh, early December, uh, and we met with, uh, Secretary Duffy and Administrator Barr, and, um, uh, Chris Spear went with us, and we left the meeting and he was like, that’s a first. You know, he said, I have never been In a meeting with the DOT FMCSA to where when we left, we said, okay, these guys got it and they’re going to do something about it.

Speaker 1 [14:11] And they’re doing it.

Speaker 2 [14:13] I mean, they’re doing a lot. Yeah, they have this administration. We are so blessed and honored to, you know, to have them. And they really care about trucking and they care about citizens. They care about everyday citizens traveling the interstates, traveling the roads. that they can feel safe. And we’ve got to get the industry back to where it is a safe industry.

Speaker 1 [14:35] I agree with you, Mark Hoare. We’re running out of time. Real quick question. Oil. We’ve got to ask you about energy. You have delivered a lot of gallons to this industry. First of all, do you miss it? Do you miss being in the energy part of the industry? And what’s the state of oil?

Speaker 2 [14:56] First of all, yes, I do miss it. I would be lying to tell you that I didn’t. But yes, I do miss it. Here’s what I see in oil is that it’s especially diesel. And John hit on this very eloquently. But our crack spreads on diesel are $87 today. $87, a typical crack spread and a refiner margin. That’s what crack spread is, refiner’s margin. And you look at it and say, What is typical? What is typical? Typical is $15 to $20, $20 being really, really, really good. Okay, really good. And so $87 is a little bit more than just out the top. And so when you hear President Trump talk about the oil companies, that’s what he’s really talking about and should talk more about the amount of profitability. Now, why is diesel so much more than gas? Gas is $40. On the crack spread, which is still huge. But diesel is being exported. And John talked about this, you know, the amount of refineries that are being affected in Russia and Ukraine. And you got to realize, we’re at 20% consumption on diesel fuel in the United States, 80% gasoline. When you look at Europe, Europe is about 50% to 55% diesel versus gasoline. So it’s a heavy diesel distillate consumer. And so that’s where the diesel is going. We’re exporting now about 2 million barrels a day, and it’s pretty much all going to Northern Europe. And so that’s what’s kind of keeping the price high. I do think, and I’m a little bit bigger proponent of this, that as this conflict ends— and don’t ask me when it’s going to end because I have no idea, but at some point in time it will— now we’re producing about 14 million barrels a day. Probably by next spring we’ll be in the 16 million barrel range. And I think you’re going to see crude in a range somewhere between low side of $62 and maybe Maybe even in the high 50s as it was before it got there. But the demand is really strong, as we know, both gas and diesel. The demand is strong. So when you look at this crack spread, it has got to come down. Do I think it’s going to be $20 in the next 6 months? No, but I think it will be under, under $40. So I think you’re going to have some, some retraction of diesel pricing. Especially with the conflict. And as John mentioned, you’ve never seen anything— the traders react when there’s good news, or you think that this conflict is going to end, you see an immediate reaction and a discount of maybe 20% in the price of crude oil. And I think you’re going to see that really happen when the conflict ends. You’ll get back to where pricing was before the conflict, which is in that, uh, you know, low 60 range to mid 60 range.

Speaker 1 [18:11] So Mark, we’re gonna have to go. Love having you on, man. It’s good to see you. You look great. We’re gonna have you in Chattanooga. Come to Chattanooga for F3. We’ll be friendly here, I promise.

Speaker 2 [18:21] I’m going to you. I just told Asa, I said we need to go.

Speaker 1 [18:25] You got to come down to Chattanooga. Now you’re in Nashville, right? Nashville, yes sir. Yeah, so you left Knoxville. So we’re good to see you

Speaker 1 [0:07] For today’s Sonar Update, Friday, August 7th, I want to talk a little bit about the overall freight economy and, well, Sonar Freight data, and then the economy as a whole is a little bit of an economic update. There’s not a lot moving in the freight data week over week, so I wanted to zoom out a little bit and look at it a little bit more holistically. And when you do that, this is one of the more interesting weeks we’ve had all summer because freight, manufacturing, and the labor market are all telling us a little bit of a different story. So this is one of the reasons why having real-time data is so important so that you can really watch these things as they develop and rapidly change. The Bureau of Labor and Statistics released the July jobs report this morning showing a decline in 23,000 nonfarm payrolls. So that was a bit unexpected. The consensus was that we’d be adding between 83,000 and 95,000 jobs. And instead, it was reported that we were down 23,000. Unemployment did tick down to 4.1%, but it wasn’t driven by labor force increasing or by people finding jobs. It was driven by labor force participation falling to 61.4%, which is a 5-year low. So people are leaving the workforce rather than finding jobs. to bring that unemployment number down to 4.1%. Also, the May and June numbers were revised. And between those 2, when you combine those revisions, those prior 2 months are 103,000 jobs weaker than were first reported. The losses in jobs month over month were relatively concentrated in a couple of areas. Local government and education was down 50,000, but that’s mostly seasonal noise and really not that relevant to the freight market. However, retail trade As well as warehousing clubs and general merchandise were also both down 19,000 and 21,000 respectively. And the retail number matters because those are shippers generating truckload freight. Then to round it out, transportation warehousing employment was flat, not declining, not hiring either. So kind of what we’re seeing in our current sonar numbers. So let’s talk about that, what sonar is showing on the freight side. So our STRI, Sonar Truckload Rejection Index, is at 13.6%, which is down from that high peak in early June of 17.9%. So we have seen a little bit of a 3-week slide. But again, I feel like this is relatively seasonally normal. STVI, the Sonar Truckload Volume Index, is also declining alongside it. It’s down from mid-July peak. To about 11,258 currently. So it’s relatively normal for those numbers to move in tandem. And as we’ve said all along, this is not a demand-driven tight freight cycle. It is a lack of capacity freight cycle. So capacity did loosen a bit. But again, I feel relatively normal for July and August numbers. We just saw that really high peak early in June that brought the baseline up. Spot rates are down slightly versus the 30-day average, but contract rates continue to rise. They’re near their high. And as you can see in the spot-to-contract spread graphic, They are— that spread is getting smaller. So while spot rates have come down a bit over the last 3 weeks, contract rates are continuing to rise. So that is happening as new mini bids have come out and been put in place and new contracts are being put in place with contract rates rising. If we look at the country regionally, we are seeing capacity loosen in the Southeast, the Atlanta area, and in El Paso the most quickly. But we are also seeing some parts of the country remaining elevated. Green Bay stands out. So across the Midwest, tender rejections are remaining elevated and have actually gone up the past few days. So the bottom line is the The freight data and the jobs data are sort of pointing in the same direction to soft demand, but I think it is relatively normal summer seasonality. And I want to put that a little bit in context with the Sonar Pricing Power Index. So that ticker is FWPI. We also each week produce a detailed article on what is happening with that pricing power index, which gauges really who is holding sort of the balance of power and has the leverage in negotiating capacity, demand, and pricing. And we boil it down into a single weekly score on who has the leverage between shippers and those providers or carriers. So it’s a great article to read each week. It can be found in the FreightWaves Market Monitor. Or it can be found inside Sonar platform under research. So the current reading for the PPI this week is 72. It’s down from a mid-July peak of 79, but it’s still firmly in carrier favorably territory. So it’s easing a bit, but it’s not flipping. Capacity has loosened modestly and the spot-to-contract spread has narrowed. And so that’s the STRI decline we were talking about. But that’s being offset by contractual pricing continuing to remain resilient and begin to rise, as well as rail volumes sitting near the top of their 5-year range. So as we talked about earlier, some of the rejections and volume numbers, I wouldn’t overread the rejection slide as a market flip to shippers by any means. The PPI still clearly says that carriers have the leverage. It’s just softened a bit off of that really high recent number from early June. The other thing that’s pointing to what I believe will lead to some increased demand and a continued tight freight market is the ISM manufacturing data. So the ISM PMI hit 55.6 in July, which is the highest since May 2022 and the 7th straight month of expansion. So new orders and backlogs both accelerated and manufacturing added jobs for the first time in 33 months. So all of this should really create continued acceleration in the industrial activity happening at the exact same time that truckload demand is softening. So while freight demand feels like it has been weak, I believe freight demand is going to have to catch up with what the manufacturers are signaling, or shippers are really still burning through inventory rather than ordering fresh capacity, which isn’t creating that demand yet. Services PMI. Was it 51, 54.1? But services employment fell back into contraction. So that’s another kind of cross-current number that doesn’t necessarily align. But I think services versus the actual industrial manufacturing is less important of a number. And then the last thing that’s sort of throwing a wrinkle into this and that we’re all, we’re all watching is the conflict in Iran escalating and de-escalating and re-escalating. DOE diesel is up 16.8% month over month. So the conflict has flared back up. So we will see what happens there and what that continues to do regarding, you know, spot rates and if carriers continue to have the ability to recoup those fuel costs based on a lack of capacity and really push those rising fuel costs through in their all-in spot rates. So to really close this out, the week’s freight numbers look boring on the surface. Normal seasonally, normal seasonal July and August softening. But underneath, there are really 3 parts of the economy that are pulling in 3 different directions. The labor market is weakening, manufacturing is accelerating, and inflation is, is really refusing to cooperate and is sort of an unknown at the moment because of the war. So freight and the PPI specifically sits right at the intersection of all 3, which is really why it’s worth watching that Pricing Power Index number and taking in all of the context of what is happening in the market and available leverage for carriers versus shippers when negotiating contracts and rates.

Speaker 2 [8:48] So, Julie, obviously a little softness, or we’ll call it cooling, in the month of July and August. But I think as we’ve heard for public earnings, no one is bearish. I think that’s the headline, right? Do we worry about the housing— I mean, the employment market cooling? I think a lot of that is actually encouraging if you’re worried about interest rates, right?

Speaker 1 [9:08] I think the employment is cooling, but it’s not cooling in transportation and warehousing. There’s a little bit of pullback in some retail, but it’s not anything that should affect Transportation specifically. I think other parts can be cooling while transportation is hot and demand is still leaving the market. And there’s been nothing that’s allowing— I’m sorry, capacity is still leaving the market, and there’s been nothing that’s allowed capacity or anything indicating capacity is entering or will be.

Speaker 2 [9:34] Well, I think we’ve talked about that. John Kingston talked about that earlier, is the fact that the employment number hasn’t shifted at all really since February. And then transportation employment, which I find encouraging. I think the fact that the overall employment number is cooling just a bit, tiny bit, not a big number. It’s not anything they should be worried about. It’s actually good from an inflation standpoint, because it will cool a lot of the threatened inflation that everyone’s worried about.

Speaker 1 [9:56] Yeah, I don’t know what is going to happen with that inflation and the Fed with oil and diesel prices and energy prices, employment. It’s kind of a mess.

Speaker 2 [10:07] It’s interesting how the energy market, everyone thought it was going to crater the consumer. It’s not happening. In fact, John Kingston had something he tweeted earlier today about just the number of miles driven, the amount of gasoline being consumed by AAA. They’re not showing any sign that consumers are changing their consumption habits. We talked about that. Consumers spend as much as $400 a month on food between grocery and food delivery. They’re really stretched on higher oil prices or gasoline prices by 60% to 70%. Uh, dollars a month per household, they would stop having their burritos delivered at $28. They’re not doing that.

Speaker 1 [10:44] Is it bad that I think that $400 number feels low?

Speaker 2 [10:46] I mean, it’s all perspective, right? But if you’re gonna—

Speaker 1 [10:51] if you had a choice, I think it depends on how many people are in the household and all of that.

Speaker 2 [10:54] But say gasoline prices are really impacting you, wouldn’t you just stop getting your burritos delivered? $28 for a burrito delivery is a lot of money.

Speaker 1 [11:03] Yes, some people— or I would eat at home. I don’t know if Will would stop getting his food delivered.

Speaker 2 [11:08] He does?

Speaker 1 [11:10] He’s really big on it.

Speaker 2 [11:11] That’s a family discussion.

Speaker 1 [11:12] But I, yes, I would.

Speaker 2 [11:14] You and he need to talk about it.

Speaker 1 [11:15] Because I don’t care that much about what I eat. I just would find something in the pantry.

Speaker 2 [11:17] Yeah, I kind of like getting my food delivered. So. Although not all the time. I kind of prefer it. I just feel like I want to have chain of custody of my food. I want to know what’s been—

Speaker 1 [11:29] They seal it up. The DoorDash food, they seal it up.

Speaker 2 [11:31] Still, chain of custody is important. We know. I don’t want a double broker. I don’t want a double broker.