Source: Elizabeth Baatz, Thinking Cap Solutions. E-mail: ebaatz@ice-alert.com

Thanks to a steady diet of high crude oil prices feeding into ever-higher diesel fuel prices, truckers face a limited menu of options: cut costs or raise rates. The trucking industry must be pursuing cost cutting with a vengeance because the latest price survey shows little rate-hike activity. In February 2005, less-than-truckload prices actually declined 1%. Compared to the same month a year ago, LTL prices were up just 6.2%, down from an 8.4% escalation rate three months earlier. Truckload companies have fared slightly better. On the heels of a 1% price jump in January, TL prices increased 1.2% in February. That gain barely made up for December's surprising 1.1% price cut.

With wholesale jet fuel prices up 39.3% from a year ago, the airline industry should be raising its prices. But due to intense competition among airlines, airfreight rates have held relatively steady. In February, the average price for shipping on domestic airlines' scheduled flights and nonscheduled flights dropped 0.3% and 0.8%, respectively. Looking at prices compared to the same month last year, prices are up only a respective 1.1% and 3.7%. Air couriers, however, have done a much better job at recouping fuel costs. Here we see that domestic and international air courier companies have increased their prices from year-ago levels by a solid 8% and 7.2%, respectively.

With trade between China and the United States burgeoning, is it any wonder that deep-sea freight rates continue to loom large in the minds of logistics managers? Luckily, according to data from the U.S. Department of Labor, in the first two months of 2005, deep-sea water transportation prices haven't budged from December's 134.4 index value. Note: We rebased all transportation price indexes to 100 in 2001, so deep-sea prices are up 34.4% from the 2001 average. In contrast, even after a 12.6% price hike from February 2004 to February 2005, the price index for shipping on inland waterways now stands at 114.5. Prices for some ancillary shipping services, up 6.6% from a year ago, still bear watching.

The rail industry weathered a 0.7% drop in its average prices from January to February, as the West dealt with floods and the East with bitter cold. The price-cutting action was due entirely to the intermodal sector, where average tags dropped 5.1%. Should that data point survive next month's revisions, it will represent the second-largest one-month price drop on record. The largest price drop occurred back in October 2004, when intermodal rail rates dropped 5.4%. Note that last year's price plummet was followed by a powerful 7.6% price hike in November 2004. Whether or not intermodal tags are followed this time with a big price hike remains to be seen, but with other transportation modes passing along higher fuel costs, a sharp price hike for trailers on flatcars appears likely.