Analyst foresees ‘mother of all capacity shortages’

A leading trucking analyst delivered both good news and sobering insights to the audience assembled for the 77th annual Truckload Carriers Association convention recently. 

John G. Larkin, managing director and head of transportation capital markets research for Stifel, Nicholaus and Co., had plenty of “things are improving, but…” figures to share on issues such as freight capacity constraints, the state of the U.S. labor force, diesel prices, and the broader economy:

Capacity: The forces at work reducing freight carrying capacity in the trucking industry are “overwhelming,” Larkin noted, citing CSA, tighter Hours of Service regulations, the pending electronic logging mandate, hair follicle drug testing, speed limiters and increased enforcement in general. To make matters worse, by 2020 the industry could be short a quarter of a million drivers.

“Logistics costs have dropped precipitously since deregulation, Larkin said. “The question now is, ‘What do we do for an encore?’ It is getting harder and harder to get more blood out of a rock.”

By 2017-2019, Larkin predicted, “The mother of all capacity shortages will really materialize. This could actually constrain the growth of the U.S. economy, and this is kind of worrying.”

The labor force: In spite of generally declining unemployment numbers, the good news, Larkin pointed out that the “participation rate” of workers actually willing to work has been declining as well over the past six years or so. 

“People are permanently dropping out of the job market and maxing out on social welfare benefits instead of going to work,” he observed. “Trucking fleets are not competing with other fleets for drivers; they are competing with the welfare state.”

Truckload sector: Trucking still accounts for 75% of the U.S. freight transportation market. Railroads are not going to “take over,” Larkin said. “They can barely handle the percentage of freight that they move now.

Diesel prices: In response to a question from the audience about the currently rising diesel prices, Larkin dispelled any false expectations that oil prices would stay low. 

“Low oil prices will be temporary,” he said. “Six to ten months from now, we will see the supply of shale oil taper off rather significantly. This time, the Saudis have not reduced their own oil production [to reduce global supply and stabilize costs]. And it costs Saudi Arabia much less to produce their oil than shale-derived oil-- only about ten dollars per barrel.”

Economy rebounding: The domestic economy does have the possibility of rebounding; there are lots of positive things going on, especially in the areas of domestic energy production, e-commerce and trade, Larkin noted. 

“The future looks very bright if government will get out of the way and let us do our jobs,” he said. “That may be a pipe dream, but we can still hope.”
Wendy Leavitt’s complete coverage of Larkin’s presentation at the TCA meeting is available on

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