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Fuel Prices Climb as Shippers and Carriers Adjust

 

After a steady drop, it looks like fuel prices are heading up. According to the US Energy Information Agency, the culprit behind rising fuel prices is the increase in global oil prices, which were partly affected by greater “unplanned supply disruptions.” In fact, unplanned supply disruptions averaged more than 3.6 million barrels per day in May; the highest monthly level recorded since the agency said it started tracking global disruptions in 2011. The agency noted that global oil supply outages are expected to decrease in June because most of the recent outages are starting to subside.

As fuel prices spike, is this welcome news for carriers? According to DAT Solutions, a provider of business intelligence and load boards, “Total carrier revenue has been impacted by a 35% drop (10 cents per mile) in the fuel surcharge compared to last May.” However, as fuel prices go up, some shippers may not be prepared.

Market research Company, FTR, noted that shippers pushed for lower trucking rates during the first half of this year to hedge against potential higher fuel costs and surcharges in the second half of the year.

It’s a tough situation for a trucking market that is already struggling with other issues including a shortage of drivers and increasing capacity. Indeed, DAT commented, “Spot freight has declined year-over-year since January 2015. Contributing factors include vastly increased contract carrier capacity and intermediaries tendering exception freight to their core carriers.”

Still, not wanting to be caught off guard by any further spikes in fuel prices, Estes Express Lines is among a growing number of carriers to more efficient trucks, trailer skirts and onboard computers to improve fuel efficiency and reduce costs. Another example is LTL carrier, Old Dominion. As part of the U.S. Environmental Protection Agency (EPA) SmartWay program, Old Dominion is adopting technologies to reduce emissions and improve fuel efficiency, such as wide based tires, reducing highway speeds, idle reduction, automatic tire inflation, improved freight logistics, improved aerodynamics and longer combination vehicles. Meanwhile, the North American Chassis Pool Cooperative has partnered with Asset Intelligence to deploy a chassis trucking tool designed to improve fleet utilization and reduce fleet maintenance costs.

Advanced planning by shippers and carriers alike are encouraged as fuel prices are expected to climb upwards. The Department of Energy’s Short-Term Energy Outlook expects 2016 diesel prices to average $2.27 and increase to $2.64 in 2017 with West Texas Intermediate Crude Oil pegged at $40.32 per barrel in 2016 and $50.65 in 2017.