Question-and-Answer Session
Operator
(Operator instructions) Our first question is from Edward Wolfe.
Edward Wolfe – Bear Stearns
I think the $64,000 question that everybody’s approaching in different ways is trying to understand -- it really feels like capacity has come in recently, demand’s not there, but at some point this can get explosive. But we’re not seeing it follow through to pricing yet. Is it your sense, having been through a lot of cycles, that maybe this cycle is a little bit different, in that with the changes in engines and other things that the pricing that we saw in 2003 to 2006 that was unprecedented – maybe some of the smaller guys have held in there longer than in the past or are a little healthier coming into this thing than the past? And that maybe this is tightening without demand getting better, it’s tightening now gradually on supply, but not a dramatic push from demand. That maybe the pricing is getting better but it’s going to take a longer time. What’s your sense of 2009 pricing if you had to look out 3 quarters from now where we’re going to start the year, and just directionally, the timing for how this is tightening versus past cycles.
Kevin Knight
Well, probably my answer to that question, Ed, would be simply this: that as you look at the last year in terms of fuel and other cost issues, it’s been more emplaced than any time that we’ve ever witnessed, in my 32 years of tracking. While at the same time, though, because the glut of 2006 pre-buy has basically disconnected the market from actual cost. And so, I believe that whenever equilibrium is struck, there are significant costs that have got to be recouped at some point when the market actually reconnects based on balance.
And it could be, if we get a lift from fuel by fuel continuing to decline, if we’re fortunate enough to see that, then from a customer perspective – maybe their cost won’t increase – but they’ll be able to compensate us additionally on the base rate to take care of some of the costs that we haven’t been able to cover going back for the last several quarters. So I think what would work good is if fuel can come down and that takes pressure off of our customers well at the same time, as the market balances, it should give us an opportunity to get additional rate increase.
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