The trucker lifestyle just isn't cutting it anymore. Trucking workforce shrinkage has been an issue for years, but 2018 kicked it into high gear. Complicating new technology, expensive tariffs, and a booming economy aren't helping sell the whole "exhausting, uncomfortable work" thing. What happens when there just aren't enough truckers? (And, no, self-driving trucks aren't right around the corner to fix this.)

In this week's episode of Industry Focus: Energy, host Nick Sciple and Motley Fool contributor Dan Kline explain how we got here, how the shortage will affect the economy, which businesses will be hurt the least by the inevitable price increases, how investors can follow this trend going forward, and much more.

A full transcript follows the video.

This video was recorded on Oct. 18, 2018.

Nick Sciple: Welcome to Industry Focus, the podcast that dives into a different sector of the stock market every day. Today is Thursday, October 18th, and we're discussing trucking. I'm your host, Nick Sciple. Today, I'm joined in studio by Motley Fool contributor Dan Kline. How are you doing, Dan? 

Dan Kline: Hey, Nick! How are you? 

Sciple: I'm doing well, Dan! You know, you just got back from the Bahamas. You've been jet setting all across the country and across the world. You were in the Bahamas over the weekend. You're up here in D.C. with us now. How's life treating you?

Kline: I am not sure if the people watching this at home can see this, but I am a lot pinker than I normally am. Apparently, even though I live in Florida and spend a lot of time outside, the sun in the Bahamas is just something else entirely. I'll throw a little free commercial in for the Bahamas. If you get a chance to go, the water is bluer than anything I've ever seen. It's just a lovely, albeit incredibly expensive, place to go. 

Sciple: Bahamas tourism department, if you're listening, we could use a sponsorship. We're always welcome to donations. Today, we're talking about trucking. The reason this is an interesting thing to talk about is it really touches every single business in the U.S. economy. No matter what business you're in, you have to move goods from place to place. It's going to affect you. Trucks are the most common mode of transportation used to import and export goods from the United States. And it's expected to grow at a rate of 4% per year between 2015 and 2045. It's really a significant portion of our U.S. logistics, how things get from place to place. When you go to the store and buy something, more likely than not, that was brought to the store in a truck. 

But what's really significant in trucking today, what we're really here to talk about, is that there's a massive trucking shortage, and that's been growing over time. Do you want to talk a little bit about the shortage and how we got there?

Kline: What's really interesting about it is, trucking is a relatively good job. Average pay is somewhere in the 50s. You can make $100,000. It requires about six weeks of training and there aren't very many jobs. You can take a six-week class that costs you a few thousand dollars, and you're immediately going to have a job that pays $50,000 or more. 

The problem with it is, despite all the positives of trucking, it's also kind of a miserable life. We're having trouble as a nation talking specifically younger people into taking these jobs. That's leading to a very significant -- hundreds of thousands, the numbers vary depending on who's telling the story -- of open jobs, and that's going to push prices for everything higher.

Sciple: Exactly. We've seen various estimates. I saw announcement from FTR Transportation Intelligence as high as multiple hundreds of thousands. But then, you've also got, on the low end of the range, The American Trucking Association is estimating we're going to need about 51,000 new drivers. This is a shortage that's been growing over time, but it's become particularly worse over the past couple of years, particularly this year. We began enforcement of electronic time logging devices in April. Those are devices placed in a truck that track the time that the driver is operating a truck. We've had restrictions on truck driver times back since 2004, where we put a maximum workday in for truck drivers at 11 driving hours in a 14-hour period. That regulation was in for a long period of time, but it's become really particularly significant since this electronic tracking technology has been put in place, because there was a little bit of fudging of the numbers. Right, Dan?

Kline: There was a lot of fudging of the numbers. If you were a driver, you essentially got paid for the miles you put it in on the road and getting where you're supposed to go on time. All the rules designed to protect you were also rules that curtailed your income. So, in some ways, the electronic tracking devices protect drivers from themselves. The other challenge is, it used to be considered, driving time was the only factor. Now, wait time matters. If you're a driver and you clock in, and it's three hours for your truck to get unloaded or loaded before you go to the next place, that impacts how many hours you can drive. Basically, what it does is, we had this shadow workforce of drivers who were super productive -- working 15 hours in their 11 hours. Now that they can't do that, it creates increased demand. 

Sciple: Exactly, Dan. This is one factor that's coming in, the regulatory aspect. You talked about how there's a shortage of younger people entering the trucking workforce. Part of the reason behind that is that the economy has been so great. You talked about how trucking can be a difficult job. You're away from your family, you're on the road for months, weeks at a time.

Kline: You're eating badly, there's no place to shower. There's really a lot of negatives to it aside from the pay.

Sciple: Yeah, all sorts of things. So, now, with the unemployment rate being so low, there are many opportunities out there for people to choose to work in to avoid that trucking lifestyle. We've got some regulatory influences coming in, that's really been tightening the amount that the truckers available can work. Then, there's also been the broader economy, which has limited the people who even want to join that pool. 

This is leading to rising costs. According to the Labor Department, long-distance trucking costs advanced 9.4% in June from a year earlier, which is the largest increase we've seen in nearly a decade. That's only going to get worse. Demand for trucking is only rising because of e-commerce and all those sorts of things that we talk about every day here at The Motley Fool. 

Kline: We also went from a trucking system where a full truckload went to a Walmart or a supermarket or whatever big store destination. Now, there are literally full trucks full of individual packages driving around. Obviously, it takes less time to bring a full truckload of something somewhere than it does to bring multiple full truckloads, sort that into individual packages, and then go deliver those individual packages to people. We've created not only added demand, but the same amount of goods now requires more handling. 

Sciple: Exactly. Like you said, taking a truck to 50 different homes is different than taking it to one individual household. One other thing to pull the thread here is that this is a problem that's not going to go away anytime soon. There's a lot of promise out here about driverless vehicles, maybe driverless trucking filling this gap. But this is something that may be five to 10 years away. The example that I used with you when we were preparing for the show is that for a long time, we've had autopilots in airplanes and large trans-ocean vessels. We still have to have people in those to make sure that everything's running smoothly. There's limitations in our driverless technology today. For example, LIDAR systems are very important for tracking technology for trucking. However, they struggle in adverse weather conditions, particularly the rain. If you're going to come up with a logistical solution that is going to address the entire U.S. retail landscape, you have to be able to work when it's raining.

Kline: The solution isn't going to be automated driving, at least not in the short-term. It is going to be logistical planning. You're going to have more companies do what Amazon (NASDAQ:AMZN)Target, and Walmart have done, which is absolutely work to maximize their supply chain, to know full well what the cheapest way to get the gross volume to a warehouse and then the individual item to you. That's going to be a mix of absolutely everything, from trucks to drones to pack mules -- probably very few pack mules --whatever works in each situation. You're going to see more third-party solutions like your FedEx and UPS (NYSE:UPS), but even on and in-your-warehouse basis, that works sort of like cloud computing for smaller companies. The days of an inefficient Postal Service doing a lot of deliveries, that's not going to be supported by the workforce we have. 

Sciple: Exactly. One last thing I want to mention before we go to the break and then the second half of the show is that, this trucking factor is really affecting logistical infrastructure. But, we also have to talk about tariffs. When you're putting increasing fuel costs, a tracking shortage, and tariffs on top of the existing logistical infrastructures of these businesses, that's really creating pressure points for these companies. The people who can really manage their logistical expense are going to be in a position to thrive here.

Kline: I think we have a retail world that is looking a little to the future. Your goal at Walmart, Target, Amazon, all the big players, is to not pass these costs along heading into the Christmas season. They've stockpiled goods, they've done whatever they can do. But when you get to January, I think you're going to see some pretty significant price increases for trucking reasons, for tariff reasons, for labor shortage reasons. We're masking that now. We'll probably see some lower margins heading into the fourth quarter, as well. 

Sciple: Right, Dan. Dan, to lead off the second half of the show, let's talk about how trucking is impacting the energy market. Over the past three years, we've seen United States oil output really coming to fresh new highs, production in the Permian has more than doubled. We've mentioned the Permian in the past on the show, for folks who haven't listened. This is a large oil field in West Texas. It's been in existence for a long period of time, but over the past several years was the rise of fracking. We were able to get access to oil there was not previously accessible there, which has really led to a huge boom in that area of that country. 

Do you want to talk a little bit about how that's affecting trucking?

Kline: Yeah. It's created its own set of problems. Just because you have the ability to pump all this oil doesn't mean you have the infrastructure to get that oil to market. We've actually found that oil prices for oil pumped from the Permian have gone down. They have to supplement the fact that there's an added cost of trucking. They don't have adequate pipelines, they don't have adequate trucking themselves to get the oil to where it needs to go. It's going to take years. They're actually building wells that they're not using, that they're not pumping from, in order to stake the claim on the oil, but they can't get that to market; and if they do, they can't do it efficiently. At the moment, yes, we have all this resource, but it's actually creating more problems than it solves.

Sciple: Exactly, Dan. I think another thing we need to talk about, as well, is that it's not just getting that oil out of the ground and bringing it to market, which is also a significant role for trucking, particularly with the lack of pipeline capacity in the Permian right now. But it's getting those supplies needed to do the drilling to the wellhead. That may be fracking sand that you need to get to the wellhead. You have to bring water to help pump into the well. You have wastewater that may be needed to take away. All those sorts of things require a truck and a driver to bring them to the wellhead or to take them from the wellhead to market. 

I talked about at the beginning how this is a little bit of a boom town situation. We've seen a mass of people coming into the Permian. There's been a huge shortage of truck drivers and there's several reasons behind that. First off, U.S. 285 is the large thoroughfare between Carlsbad, New Mexico and Pecos, Texas, which is really the heart of the Permian. Over that period of time, from 2008, when fracking really started getting out of the ground, until last year, traffic on that road has gone up 10X. You already have a shortage of drivers, but in addition to that, you have the infrastructure that those drivers use to transport goods from place to place really becoming strained. That's not just in the Permian. This is a microcosm of this. Nationwide, we've had infrastructure problems. We saw it in the last presidential election. It was a huge issue. That's a thing that's affecting the Permian.

So, we have this infrastructure problem. How do you fix the problem? You invest in infrastructure, you build out the road. What does that do? Well, that means that you have to have workers on the road, which makes this problem even worse, because you already have too many people for not enough road, you're doing work on it, it makes the congestion even worse. This is another thing to add in when we're talking about trucking: according to the American Trucking Association, the trucking industry loses $50 billion a year sitting in traffic. That could be places like the Permian, with an artificially large number of people there. But it could just be in other places across the country where infrastructure is really dropping the ball. 

Kline: This is one of those cases where you have to, at some point, accept the pain. I think we've all lived someplace where they announced, "We're going to widen the highway," and you think, "That's great! I drive to work, there'll be four lanes instead of three." What you don't think about is that for two years, there will be two lanes instead of three as they deal with this. That's what has to happen in the Permian. Whether they build a new highway, whether they build rail capacity to get some of this stuff in, new pipelines, they're going to have to do this. The problem is, when you're forecasting something like oil prices, you don't know, three years from now, what the impact of electric vehicles will be. The demand for oil could be dramatically different. We saw a lot of this in the most recent Texas oil bust in the 80s. People had built an economy based on oil at $80 a barrel or whatever the number was. When it dropped to $30, people lost their entire businesses. Things like sports teams collapsed in those areas because there simply wasn't the income there used to be. That could happen if you make the decision to spend billions on building new roads. 

Sciple: Right. This is just a microcosm for the limitations of infrastructure, as well as, when you put strains on areas, how trucking and things that seem like a background industry really come to the fore and limit the prospects for growth. 

Let's swing into retail, which is probably the place that our listeners are going to interact with trucking the most, as I said to lead off the show. I used to work at a grocery store when I was in college. I worked at Publix down in Florida. You may be familiar with that.

Kline: [laughs] Yes, there's only about 300 of them within two miles of my house. 

Sciple: Every morning, we'd have that truck come in, and we'd put those goods out on the shelf, and people would come in and buy it. That's happening in every retail store across the country, which is why this trucking shortage is going to affect retail shoppers. The short version of what we're going to talk about here is, get ready to open your wallets. 

Kline: Trucking becomes a commodity. For a while, I worked in my family business. We brought in container loads of steel scaffolding from China. And when China was still a novel place for companies to source stuff from, it was a relatively fixed price and somewhat inexpensive to do that. As the demand increased, the amount of ships and containers did not. You might say, "I can get that delivered for $2,200 and it'll take six weeks. Or, I could pay $8,000 and have it in two weeks." It's a very fluid demand. Publix has a lot of buying power, your local store does not. So, you may find the big chains having an advantage, especially the ones like Walmart and Amazon that maintain their own trucking fleet, over the smaller group that's relying on FedEx, UPS, private truckers to bring their goods in. They're not going to be the priority, or they're just going to have to pay more, which is obviously going to cost you more. 

Sciple: Right. From your perspective, Dan, what do you think? The trucking shortage, as well as all of the other strains that are being put on international logistics -- dealing with these situations, the advantage is going to go to the company that has the most scale, the ability to manage their logistical infrastructure in a way that they have more control over.

Kline: And the ability to take labor out elsewhere. One of the things UPS has talked about is that they don't have a trucking shortage because they have a pipeline of workers. You go from the floor to a small truck to a big truck, they train you along the way. If they need 20,000, more truckers, they can put robots into the warehouse. They might not be able to automate driving the truck, but they can automate other parts of their workflow. I think that's something you're seeing in Amazon and their warehouses, and you'll see that more and more with Walmart. The picking of the orders, whether it's for individual delivery or mass distribution, is going to be automated. You're going to take workers out of the chain and force them into trucks if that's the only job available.

Sciple: Right. Talking about Amazon and their warehouse infrastructure, it really amazed me, a stat that I saw. Currently, Amazon requires one minute of human labor to get a package on a truck. The people who are loading up the boxes, the actual humans, a robot comes to them, brings them the products that they need. The human just takes it, places it on the conveyor belt, and then that conveyor belt boxes everything up and puts it on a truck. All these companies that can really squeeze all that fat or wasted time out of their logistics are really going to put themselves in a position to succeed. 

Kline: Yeah, and it becomes about efficiency. You talked about UPS, how you never put your keys in your pocket. A big company can map out every efficiency, can literally do things like build a bathroom in a location that makes it more convenient to make bathroom breaks faster for workers. A small company can't do that. They can copy it a little bit. So, this is going to be another thing that puts the squeeze on small business and really forces small business to differentiate on something other than price. The cost of goods is going to comparatively go down for big business and up for small business. 

Sciple: Right. For these third-party providers, you talked a little bit about UPS, how they've been able to handle the trucking shortage. Another thing that they can provide, and they call out, is that they can provide a different lifestyle for their truckers than maybe someone who operates with another independent provider. UPS, their spokesman, Dan McMackin, called out and said that the average UPS trucker is out and back in the same day. They're sleeping in their own bed, they're not staying in a hotel or on the road. That's an advantage that some of these larger companies can offer to their employees that maybe an independent company just doesn't have the flexibility to do.

Kline: Again, that's going to become a question of technology. I think you're going to see more of your trains try to limit overnight trips. And, we talked a little bit about this, we might see infrastructure move more toward comfort. We've seen a death of truck stops. They're not as prevalent, the days where there were shower facilities and even gyms and decent food. We don't have a lot of that. You might see, in some places where overnight trucking is necessary, a rebirth of these trucking stops. Places you can park easily, places where you can pay for just the six hours you're sleeping in the motel, as opposed to a full night -- everything we can to improve quality of life from, you're gone for six nights and you're sleeping over your truck bed for three of them. That's not going to work when UPS or Amazon or whoever is offering you one overnight a month, sleep in your own bed most nights.

Sciple: We may have touched on this a little bit, but to really pull the thread on it, let's talk about how omnichannel retail is affecting trucking demand. We talked about having the trucks having to go to all kinds of different places, all those sorts of things. How does trucking fit in with that? How is it going to adapt? All those sorts of things.

Kline: We're in the very early days of logistics for omnichannel. Let's say you order something from Walmart for pick up in store. I think sometimes, if you knew where that had come from, it'd be preposterous how much money they lost getting you your box of gluten-free pasta or whatever it is they weren't stocking. It maybe was handled by six people, was on three different trucks, was on a shelf, was in a warehouse. It's just like we talked about the other day, where you get the Amazon item at home and it's not in the right size box for what you ordered. That's happening less and less. We're going to start seeing companies behind the scenes using AI, predictive technology. Amazon has talked a lot about, they know you're going to order razors before you do, and it's already packaged in the correct warehouse to send it to you. You're going to see a lot more technology going in to making sure we eliminate as many inefficiencies as possible.

Sciple: Right. Along those same lines, another Amazon example that that I was talking about earlier. In the past, things would be organized in a way that best fit what people could understand. If I'm a person working in a warehouse and I want to go find the good that we need to put in this shipment, maybe everything's in alphabetical order, or grouped by different genres, sports stuff over here and dry goods over here. What we're seeing now with these AI capabilities is that the way these things are organized would make absolutely no sense to you and me, but it's the most efficient way to do it based on the way these analytics has been done. It might sound like, save 10 seconds here by this different organizational structure. But when you think about a company like Amazon that's doing millions and millions of transactions, or Walmart, those little fractions of a penny saved at each step down the line become millions and millions of dollars.

Kline: I think we're also in the early days of flexible demand. Walmart will actually offer you a cheaper price on certain items if you just go to the store and get it. Amazon will sometimes give you a little kickback if you're willing to not get two-day delivery. We're both big Amazon consumers. Sometimes, I order from Amazon because I need it in two days. A lot of the time, I order from Amazon because, I'm going to run out of tea at some point, I'd better order some tea. If I could be incentivized to not care when something comes -- or, what if Amazon says, "Free two-day shipping, but your orders need to get to 35 pounds, or $99, or whatever it is, and we're not going to charge you for Prime anymore." I think you're going to see more clever things like that. Costco has some shipping options that work that way. Target has some shipping options that work that way. It's all going to be about, how do I make that truck accomplish the most work with the least work going into filling it?

Sciple: Going away, Dan, trucking is a good example of this, the tariffs show we did a couple of weeks ago is a good example -- I want to encourage investors to not just think about what's going on right in front of you. You walk into the Walmart store, here's all the goods. Think about how those goods got there. What are the steps that had to take place for this deliverable that you're getting as a consumer to come to you? I think trucking is a good way to think about that. Tariffs are a good way to think about that.

Kline: And I think you see it on your shelves. Go to your Walmart, your Target, your Whole Foods, whatever it is. Pick a smaller brand. Look at it for each of the next three times you visit. You will no longer see instant replenishment of smaller brands. You will see, when two-thirds of the inventory is gone, maybe they place an order. Because for that small brand to compete, they have to send you a caseload, a palette, whatever it is. They can't send you, "You're out of the jalapeno flavor? I'll send you three of those." You're going to see some different trends in shelving, and companies trying to figure out ways to make that work. You don't want to be out of stuff, but you also don't want to have these inefficient little deliveries that I'm sure you got back in your Publix days. 

Sciple: Yeah, that's for sure. For our listeners, for investors in general, when you're thinking about things like trucking and logistics, what is the best way to follow these trends as an investor? And, what is the best way to take them into account when you're making a thesis on whether this is an investment or not? 

Kline: It's a challenge to follow, because the average person isn't going to look up how many truckers we're short on a daily basis. But I think your bets here are on the companies that have the money to spend on the backbone, on the infrastructure. That's going to be your major retailers, that's going to be UPS and FedEx. It's really looking at what they're forecasting. If UPS comes out of the next quarter and says, "Yeah, we intended to hire 100,000 people this holiday season. We could only get 18,000," that's going to have a much bigger impact than if Walmart falls short in its holiday hiring when it can just eke extra work out of people, maybe trim hours, keep the same business going. Look at those trends. But for the long-term, the big guys are going to win here. 

Sciple: Yeah, it's another one of those where economies of scale win out. On UPS, last thing. If any of our listeners are in need of work, or are looking out for work, UPS just announced yesterday, October 15th, that they're going to hire as many as 40,000 seasonal employees nationwide on a one-day hiring blitz. 170 job fairs going on October 19th across the country where they're going to hire employees on the spot. If any of our listeners are down on their luck, looking for something, there's some opportunities there. As you mentioned, Dan, this is a job that pays pretty good money.

Kline: You have to be 21 to cross state lines. I don't understand why your 22-year-old who's working some bad job at a restaurant or warehouse wouldn't want to take a job where you could be out on the open road, experience different things, meet different people. Seems like something I would do, other than the fact that I'm not a great driver and we'd all be dead. [laughs] 

Sciple: [laughs] This this trucking story and logistics in general are going to be something that plays out over the next few months and years. It's something that's going to go on probably the rest of our lives. Maybe we can have you on later and discuss as this story continues to develop.

Kline: I was going to say, I'll be back in a few weeks. We could talk about the pilot shortage. [laughs] 

Sciple: [laughs] I enjoyed having you on, Dan! Let's do it again sometime!

Kline: Thank you!

Sciple: As always, people on the program may own companies discussed on the show, and The Motley Fool may have formal recommendations for or against the stocks mentioned, so don't buy or sell anything based solely on what you hear. Thanks to Austin Morgan for his work behind the glass. For Dan Kline, I'm Nick Sciple. Thanks for listening and Fool on!

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel B. Kline has no position in any of the stocks mentioned. Nick Sciple has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends Costco Wholesale and FedEx. The Motley Fool has a disclosure policy.