Trucking companies across the country are bracing for effects in the fuel supply chain. An increasing fuel shortage is possible and being closely monitored, given a variety of causes. The latest and largest reason being the shutdown of the Colonial Pipeline, due to the May 7th cybersecurity attack by an Eastern European-based criminal organization.
This pipeline transports approximately 45 percent of the fuel consumed on the East Coast. Another reason includes the government relieving of coronavirus restrictions of which have led to recently increased activity among consumers, amidst supply that was artificially low.
As these supply chain issues in many East Coast states are leading to a decrease in overall fuel supply, there is an immediate heightened consumer panic demand on top of the consistent diesel fuel trucking demand. Due in part to this, fuel price is climbing and is anticipated to climb even more. Per the United States, Energy Information Administration (EIA)’s weekly releases, the price of diesel per gallon has escalated for a record of 17 consecutive weeks.
A semi truck's fuel economy averages around 7 miles per gallon. And although a particular driver’s mileage varies based on route, weather and traffic, most drivers travel over 600 miles on any given workday. Thus, what are some of the ways that carriers are impacted by the current fuel supply chain issues as well as increased fuel prices?
Drivers with routes in states on the East Coast, along with their carriers, are closely and increasingly monitoring the fuel shortage, and determining if the planned load delivery should be delayed to those particular areas hit the hardest.
As most trucking companies tie their fuel surcharges to the weekly United States’ EIA’s average diesel pump price, the nation’s diesel price increases correlate with the increased amount charged to the shipper for freight transportation
Ordinarily, higher fuel prices mean higher overall carrier-imposed freight costs. The shipper has to then pay more to transport the freight, of which the receiver, and eventually the consumer, help to shoulder that burden.
In times of rising fuel prices, shippers often consider more fuel-efficient and economically practical alternative modes of transportation, such as intermodal carriers or rail. In addition, some companies that have flexibility in the usage level of goods or services tied to fuel costs will look to cut back on the frequency of services as a cost reduction measure.
Many carriers begin to emphasize fuel cost controls and waste management to drivers. For example, these measures, among others, all greatly impact a driver’s overall fuel economy: reducing idling time, maintaining tire pressure, cutting out-of-route miles, and driving above the truck’s fuel-efficiency optimal point.
Although the Colonial Pipeline resumed operation on the evening of May 12th, there is uncertainty about the collateral damage of this pipeline shutdown amidst the economy rebounding from the coronavirus-related government shutdowns. Fuel availability and pricing considerably affect the carriers, as well as most parties in a supply chain. If your organization would like assistance in navigating throughout the transportation & logistics industry business conditions, we invite you to contact us and visit the Schneider Downs Transportation & Logistics Industry Group. For additional information, visit the Our Thoughts On blog.
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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.