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

The fuel burden is only one piece of the squeeze. Parker said Covenant Logistics buys roughly 45 million gallons of fuel a year but recovers only about 80% of that cost through surcharges. Idle time, out-of-route miles and deadhead trips account for the unrecovered 20%, effectively erasing the margin 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," Parker said.

The math gets worse on the non-fuel side. Driver pay, health insurance, liability insurance and physical damage coverage have pushed operating costs up 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," Parker 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," he added.

For shippers, the implications are already visible in the data. Tender rejections stand at 13.74%, up from roughly 5.5% at the same point last year and above the 10.4% year-end reading — a level FreightWaves' Craig Fuller characterized as still tight, even if 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.

Drayage is one of the tightest pockets of the market, Parker said, echoing recent remarks from J.B. Hunt about difficulty finding drayage capacity. At the same time, driver pay is rising quickly, and Covenant is securing drivers as a result — a signal that competition for labor is shifting bargaining power toward carriers in the segments where capacity is thinnest.

The spot-to-contract relationship is also turning. Parker noted that contract rates have recently begun surpassing spot rates, which he called a normal and healthy sign for a market rebalancing after a long spot-led cycle. His company's rates are up double digits, and he 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 that mirrors what Knight-Swift reported earlier in the year.

Looking ahead, Parker expressed measured optimism, citing healthy tender rejection levels and strong demand from discount retail heading into year-end. But he flagged insurance as a major unresolved risk, saying there is "no telling" where liability and physical damage premiums will ultimately settle.

Regulation adds another layer of expense. With new engine rules on the horizon and OEMs signaling they may pay regulatory fines rather than absorb compliance costs, Parker warned that additional cost pressure is coming — and that rates will need to rise further to keep carriers solvent as fuel, labor and insurance headwinds carry into next year.