Highway transportation expenses for 2009 were $3,044 million, a decrease of $455 million, or 13.0%, from 2008. The decrease was the result of lower fuel prices, lower volume and certain reductions in contract pricing. Diesel fuel, which makes up 93% of the fuel purchased for highway contracts, cost an average of $2.52 per gallon during 2009 versus $3.87 per gallon during 2008, a decrease of 34.9%. Gasoline prices decreased 33.4% in 2009 compared to 2008. Although fuel costs are only a portion of total transportation expenses, the sharp decrease in fuel prices from last year’s record highs significantly contributed to lower highway transportation expenses.
Mail volume reductions and contract adjustments made during 2009 contributed to an overall reduction in contracted miles driven of 1.3 million miles, or 0.8%. The reduction was realized despite a short-term increase in miles driven since June 2009, primarily due to the startup of the Network Distribution Center (NDC) project. The project will transform existing Bulk Mail Centers into NDCs, which will improve the flow of mail into the network, consolidate package distribution and improve transportation utilization. In 2010, we expect contracted miles driven to continue to decrease as a result of full implementation of the NDC project.
Highway transportation expenses for 2008 were $3,499 million, an increase of $349 million, or 11.1%, compared to 2007. The 2008 increase was caused by higher fuel prices, contract labor rates and contract CPI rate increases. In addition, some mail that was previously transported via air was moved to surface transportation during the year. In 2008, the average price of gasoline increased approximately 30.4% compared to 2007. Diesel fuel cost an average of $3.87 per gallon in 2008, compared to $2.70 per gallon in 2007, an increase of 43.3%.
