The Effects of Low Oil Prices on Trucking

LDL Voice

According to the American Trucking Association, for every one cent decrease in fuel, the trucking industry saves an estimated $350 million. [Share on Twitter] Since last summer, the price of crude oil is has dropped drastically from $107 a barrel in June to less than $50 a barrel this month. This is the lowest level we've seen since 2008. Companies in all sectors are examining the commodity markets to determine whether this drop is part of a long-term trend, or if we’ll see a spike in prices in the coming months. Either way, current prices are presenting both opportunities and challenges for the trucking industry (Equipment Finance Advisor).

While carriers have been enjoying the reduced prices, they've been reluctant to pass their savings on to their customers. Instead, many are opting to use their newly found profits to recover from losses they've faced in previous years.  For example, they may choose to upgrade their fleets or increase driver wages.The drop in prices also gives carriers an opportunity to raise freight rates. Because shippers are paying a lower fuel surcharge, they may be more willing to pay for a freight rate increase as long as their overall cost is still lower than normal (STLtoday.com). Ultimately, it comes down to supply and demand. Carriers may not be sharing their savings, because they don’t have to.

Despite these advantages, the chronic driver shortage is still presenting challenges for long-haul trucking companies. Because of the lack of capacity, more and more shippers are taking advantage of intermodal options. If the price of fuel continues to fall, trucking companies may have an easier time remaining competitive. So far, the fall in oil prices hasn't managed to erase the cost advantage that railroads enjoy (STLtoday.com).

It’s difficult to determine how long oil prices will remain low. While this trend is showing marked advantages for the trucking industry, whether these advantages will outweigh the challenges created by the driver shortage remains to be seen.

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