In case you haven't noticed, oil spikes have been added to death and taxes as the third inescapable apocalyptic certainty of twenty-first century existence.

The U.S. economy overall remains persistently and disappointingly weak, and prospects for any meaningful improvement during the next six months are almost universally dismissed. “Hopefully, the worst damage is behind us and maybe in the second half we'll see 2 percent growth, as opposed to the half a percent of the last six months,” says James Haughey, director of economics for RBI-US, Logistics Management's parent company. “Expectations for the first half of 2009 are for 2.5 percent. In other words: Bad, but not as bad.”

While the economy has demonstrated only “morbid growth” over the past year, it's growth nonetheless and not recession, says Ted Scherck of the transportation consultancy Colography Group. “This is a volatile market with a lot of structural unknowns hitting all at once and engendering a lot of confusion,” he says. “The main danger is that we're talking ourselves into a recession in the second half.”

And the cataclysmic “fuel-pump shock” syndrome is what everyone starts with and then comes back to in this discussion. David Jacoby of supply chain consultancy Boston Strategies International recalls that last year logistics managers said they would start to change their supply chain approach when oil reached the “psychological threshold” of $100 a barrel—it's now at about $140.

“Energy cost increases are cutting across transport modes and even trade routes,” says Paul Bingham of Global Insight, an economic and financial analysis firm. “There's no escaping this huge spike whether it's passed on as a surcharge or other mechanism, and shippers have to accept this. Higher costs are inevitable and this is bad news for both shipper and carrier.”

This having been said, and with domestic spending off and the economy idling, demand remains weak across most transportation modes and there are only a few segments where shippers face non-fuel-related rate pressures. Conversely, there are ways shippers can exercise some astute leverage by staying aware of conditions specific to the major sectors of the transportation industry.

In general, trucking is still a buyer's market, with rates remaining soft and shippers still in a position to negotiate some overall reductions. The big qualifier, of course, is the fuel surcharge.

Paul Svindland at AlixPartners, a global restructuring, consulting, and financial advisory firm, says that shippers are being more receptive and understanding of this issue, and are being noticeably accommodating relative to the carriers' situation. “With diesel fuel going up as much as 30 cents a gallon in just a week, the impact is staggering,” he says. “And indications are that it will continue to rise before flattening or decreasing, and we'll never see fuel in the $2 range again.”

He believes line-haul rates will remain a fairly strong buyer's market for another nine to 12 months until the second or third quarter of 2009. He also notes that truckload (TL) typically exhibits more pronounced swings, while less-than-truckload (LTL) is more moderate and from a price perspective more balanced—thus not as much a buyer's market.

Regarding intermodal, the picture is generally similar to TL, says Svindland, but on the major corridor from the West Coast to East Coast it's slightly in the carrier's favor because capacity remains tight. “If trucking rates are soft, shippers will go to truck versus intermodal because if it's only a 5 to 10 percent difference in cost, trucking is consistent, more reliable, and offers better transit times,” he says. “For a shipper to switch from truckload to intermodal there's got to be at least a 15-20 percent cost benefit to justify the switch.”

There are two sub-categories that are exceptions to the general trucking situation, warns Svindland. The refrigerated (reefer) and flatbed markets are usually not as susceptible to swings in the economy as the general van market. Shippers using these carriers for a lot of volume will see rates holding or even going up somewhat, since a reefer relies on fuel to power both the truck and the refrigeration unit, so the diesel cost becomes a larger factor in the equation.

And finally, there is a phenomenon of changing freight patterns that shippers should take into consideration, Svindland says. With the weak dollar, exports are increasing and certain shippers now need to get product from their manufacturing sites to ports instead of to domestic distribution centers or retailers.

The problem is that the trucking equipment and the containers are in the wrong place to handle these new routes, and although this is probably only a short-term, currency-driven situation, shippers should be aware that they will face rate increases because capacity will be tight while trucks are redeployed to accommodate this shifting pattern.

RBI's Haughey notes that life is tough in this lane. Carriers remain caught between slipping demand and a combination of high fixed and operating costs, while many are still carrying relatively new equipment on their books. “There's been fallout in this sector and consequently room for the shipper to negotiate—provided the trucker is still there to answer the phone,” he adds.

For shippers, ocean rates have been smooth sailing for the last three years; but last January there were some predictions that there could be increases along the lines of $100 a container coming up this year. That was an underestimate.The biggest contract round of negotiations for ocean freight in May resulted in two types of increases, according to Philip Damas, research director at Drewry Shipping in London. “First, U.S. importers have had to agree on a floating fuel surcharge, says Damas. “Then there was an actual base rate increase between $200-400 a container,” he adds. “Up until now the ocean carriers had been willing to take the risk of fuel price changes, but now they want the shipper to share in the risk—and most importers have agreed to the terms.”

Damas believes that if it weren't for the fuel problem, there would have been reductions in ocean freight rates, but since fuel is about 60 percent higher than a year ago, there will be increases in almost all shipping lanes.

In terms of the U.S. export sector, there is also the severe shortage of container equipment already noted in conjunction with trucking. This is most acute in the case of inland origins like the Midwest. This has pushed rates up as much as 30 percent in some cases since the end of last year, since about half of ocean-borne freight is not simply port-to-port, but involves inland legs at both source and destination. Shippers moving freight from New York to Shanghai last year were paying $650 per container; now they're paying $1,300.

According to Damas, shippers who are both importers and exporters can negotiate a better price by engaging in “match-back,” which entails synchronizing their outgoing shipments with their incoming deliveries and using the emptied import containers for their exports.

If this isn't feasible, another option is for shippers to bring their cargo in truckloads to or near the port of exit for containerization, thereby avoiding the time and expense involved in requisitioning the scarce containers. For many exporters, freight rates are not the main issue and they are prepared to pay more because they're desperate for the transport capacity that they're lacking.

According to Brooks Bentz who oversees supply chain and transportation at Accenture, the U.S. trade imbalance has been radically reversed, and is reflected in terms of this ocean transport logistics problem. “The struggle in some markets to find ocean boxes to export products is a new and unexpected situation,” Bentz says. “A shipper may have new export market potential, but has nothing to pack his product in. For a lot of these shippers, export is new territory and they often don't have the solutions.”

The parcel sector has attracted a fair amount of shipper attention recently, much of it focused on the implications of the DHL cutbacks and outsourcing strategies.

The conventional wisdom is that there will be no rate skirmishing for the rest of this year since carrier margins are depressed and painfully thin, and there may even be less inclination by providers to make rate concessions following the DHL retreat from various service areas.

However, there are situations in which shippers can take some effective action. “If shippers want to take control of their variable shipping costs for parcels, they have to get over the mindset of not putting their business out to bid in the middle of a contract,” says Jerry Hempstead, specialist in transport logistics at Hempstead Consulting.

He argues that, currently, shipment counts are flat or declining and not likely to improve soon, so shippers should either go out for bids or enlist the services of a consultant with a gain-share model who only gets paid if he saves the shipper money. “Providers don't want to lose accounts over price,” he says, “and in the end shippers might not have to switch carriers because the incumbent carrier may well match the competitive offer. The point is that now is the time to go out for bids. There is no economic penalty for getting out of a contract.”

And not to be overlooked in this scenario is the emerging expanded role of the U.S. Postal Service (USPS) in this sector. “Under the new law, USPS can offer customer-specific discounts if they want,” Hempstead observes. “They haven't yet done this, but shippers should get used to including a USPS rep in any competitive bids. Their Express Mail product competes with the overnight service of UPS, and their Priority Mail with the two-day offers of the big three providers.

He also advises shippers to consider the possibility of taking advantage of the “last mile” discounts offered by USPS. These involve bulk mailing centers (BMCs) and destination delivery units (DDUs). While most shippers don't have enough critical mass to deliver to a variety of downstream locations, they might explore the possibility of using the services of a parcel consolidator who commingles shipments from various types of companies for delivery to a DDU.

Nowhere does the fuel cost burden hang more heavily than on the air transport sector.

With rates shooting into the stratosphere, shippers are downgrading wherever they can from air to surface modalities. “There's real turmoil in the air,” states Bingham at Global Insights. “It's not a base rate increase, but just the fuel surcharges that make air shipping exceedingly expensive as opposed to alternative modes. So, more and more shippers will continue to try to substitute truck for air whenever possible.”

In addition, the aforementioned DHL decision to outsource air transport within the U.S. to UPS has lessened competitive pricing pressure on the latter and FedEx, the two remaining players. “Fuel of course bedevils everyone in the transport industry,” says Bentz at Accenture, “but air carriers are suffering the most and the pass-along charges are driving shippers to divert all or more significant portions of their air cargo to ocean. Air space is increasingly becoming reserved to shipments like cameras and electronics.”

In the rail sector, carriers report that they are not expecting to push for any increases over those of last year; and most shippers remain in a fairly comfortable position. But there are a few curves in the track with which shippers should become aware.

“Empties can now be matched with full outbound loads on intermodal and carload rail for the first time in years,” notes Jacoby of Boston Strategies. “But instead of passing on the savings from not hauling empties, carriers are keeping rates steady and tacking on fuel surcharges inbound and outbound. With loads balanced, rates are increasing and some shippers will be stretched.”

Transport industry watchers have no one-size-fits-all advice for shippers, since the vagaries of individual situations are so disparate, and one man's mode might be another's man's peril. But they offer some general thoughts worth considering.

“Shippers should be continually evaluating the cost of holding inventory and the cost of filling an order via an extended supply chain,” counsels Scherck. “They have to be more diligent than ever about getting closer to the customer if possible, especially with fuel costs making the price of transport so high.”

Jacoby has a similar view: “Shippers should see if their raw materials can be sourced closer to the point of sale, and should identify wherever possible ways to cut costs by shipping direct to the customer rather than a distribution center. Even the little things count: Redesign products to be smaller, use less packaging, and pack more efficiently to save space.”

And there's one final piece of advice that comes with a sense of urgency. “There could be an economic recovery in 2009,” says Bingham, “so shippers should make whatever deals they can now and try to make them for as long as possible.”

John Paul Quinn reports on a broad range of business topics for journals in the U.S. and Europe.