The effects of soaring oil prices are seeping into every industry in metro Detroit from transportation to real estate, and consumers are paying the price beyond just the gas pump.
Crain’s Detroit Business
Kurt Nagl & Nick Manes, Reporters
Jun 08, 2022
Even though the logistics capacity crunch and shipping snarls have loosened up considerably in the past couple months, customers and consumers are not seeing price relief, said Todd Trompeter, vice president of logistics operations at Florida-based BlueGrace Logistics, whose local customers include major automotive suppliers and retail companies. The reason is skyrocketing fuel prices.
The transportation industry’s major concern has shifted from a driver shortage and lack of container space to fuel costs, which are passed through from shipper to customer to consumer, Trompeter said.
Rates are down, but gas prices have kept the overall costs high, so customers are not seeing relief.
“Rates are down, but gas prices have kept the overall costs high, so customers are not seeing relief,” he said. “The suppliers are still paying these elevated rates, so to make the profit, the cost of the goods remains high.”
Trompeter said BlueGrace is still seeing high demand for shipping in some segments of retail, such as outdoor gear, but automotive suppliers have slowed down. For the past two years, many manufacturers worked feverishly to procure parts amid a shortage stemming from COVID-19 disruptions. Many now are sitting on inventories that are not moving out of their plants as quickly, Trompeter said.
“Overall, we are definitely seeing an improved capacity out there,” he said. “There’s more availability, more trucks available.”
Amid soaring gas prices, truck drivers are facing a “tsunami,” said Paul Adams, the CEO of RoadEx Solutions LLC, a Livonia-based financial services company for independent trucking companies.
In general, Adams said of the current state of the industry, operating rates for drivers are down while the cost of fuel is up. Contracts for the loads that truckers haul are generally signed weeks in advance, meaning gas prices were likely more than $1 less per gallon at the time, he said.
“It couldn’t happen worse for trucking companies,” said Adams, adding he’s not expecting the situation to improve in the foreseeable future. “There’s nothing on the horizon.”