Effects of Fuel Costs on Logistics
Price fluctuation in the market for fuel has a constantly evolving effect on the logistics industry.
As we all know, fuel prices can fluctuate throughout the year. As demand increases, the supply decreases. As a result, the price of fuel increases.
Other factors we need to consider are current global events, at any given time these events can occasionally affect the price of fuel. Remember, about twelve years ago, fuel prices in the United States rose to about four dollars and fifty cents during the summer of 2008. This had to do with the turmoil in the middle east at the time as well as the financial crisis the country was facing back then. Car shipping prices rose much higher than normal and it was a direct result of the sky rocketing fuel prices at the time.
When Oil Prices Rise
As the cost of fuel rises, carriers are forced to raise prices or take losses. In turn, the cost of fuel does not only effect the logistics company, but also the shipper and the profit source of the shipper as well. It is an outward domino effect: If it costs more for the freight carrier to transport the freight, the shipper is going to be charged more to make up for this. If the shipper is going to be charged more to transport the freight, the receiver is going to be charged more to make up for their added costs.
When Fuel Prices Fall
When the cost of fuel falls, the reverse generally applies. The savings are passed on to the consumer in the form of lower prices, as expected. Demand for shipping services rises as the cost decreases. Sales and profitability get a boost and will encourage growth. Logistics companies who provide the greatest cost savings can redirect efforts from mitigating the high costs of fuel to working to increase the speed of service and improve other aspects of their operations.
Prices Won’t Solve All of Our Problems
We all love low prices, especially when we are filling up our cars. When it comes to the trucking industry, however, low prices can sometimes cause disruptions. As a result of the continuing truck driver shortage, the law of supply and demand is even more pertinent during times of low fuel prices.
To illustrate this point, consider that more shippers will use trucks when fuel surcharges are at their lowest. It truly sounds like a shipper and carrier paradise. However, the shortage of qualified drivers in North America means that there is less capacity available. The increased demand for capacity can lead to increased costs that would’ve been offset by low fuel prices during a time when a driver shortage did not exist.
Fuel prices are constantly changing, and the volatility keeps the logistics industry on its toes, that is for sure.
If you’re searching for a quote to ship a vehicle, you can get a free online quote at RunBuggy.com