Diesel prices increase for the fourth straight week
July 30, 2013
The increase in diesel prices appears to be more than a trend again, with the average price per gallon rising 1.2 cents to $3.915 per gallon, according to the Department of Energy’s Energy Information Administration (EIA).
This marks the fourth straight week of increases, following gains of 3.6 cents, 3.9 cents and 1.1 cents, respectively, with the last four weeks accounting for a cumulative 9.8 cent gain.
The four-week stretch of gains has more than erased the 7.3 cent cumulative decline which occurred over the previous three weeks prior to these recent gains. And compared to this week last year, the average price per gallon is up 11.9 cents.
Regardless of the fluctuation in diesel prices, shippers are cognizant of the impact diesel prices can have on their bottom line—for better or worse.
And they continue to be proactive on that front, too, by taking steps to reduce mileage and transit lengths when possible as well as cut down on empty miles. And even through shippers want to adjust budgets in order to offset the increased costs higher fuel prices bring, it is not always an easy thing to manage.
Shippers have told LM that adjusting budgets is only part of the solution when it comes to dealing—and living—with fuel price fluctuation.
UPS Freight President Jack Holmes said at the eyefortransport 3PL Summit that fuel increases need to be taken into account as part of the shipper-carrier relationship.
“A carrier—who is a partner—simply passing expenses on to [a shipper] is not in my opinion a carrier you want to do business with,” said Holmes. “The one you want to do business with is the one who will tell you ‘this is what has happened and here is what we will do to mitigate that expense’ and hopefully you do things on fuel efficiency and idle time that get you closer to negating the impact of those things on your business but those are the differences between a vendor relationship and a partner relationship—which does things to help each other.”
When asked if they expect to pay higher fuel surcharges in the coming months, a recent Logistics Management reader study of roughly 420 shippers found that 39.1 percent said yes they did, 44.1 percent said they did not expect to have to pay higher fuel surcharges, with 16.8 percent stating they were unsure.
Brittain Ladd, a global supply chain consultant, told LM that the primary strategy for shippers to combat raising fuel costs is to conduct supply chain network optimization to model the impact of rising diesel fuel and transportation costs, which he said is key as transportation costs become more important relative to production, inventory and facility fixed costs.
With that as the backdrop, Ladd said his recommended strategy for shippers is to “identify opportunities to increase the number of distribution centers to minimize distance travelled for outbound transportation and to make operational changes to trade down to lower cost transportation such as air to ground and trucking to rail. The challenge of course is that lead times and replenishment to meet customer demand must be analyzed and processes updates to adjust to the new transportation reality.”
A major contributor to the recent spike in gasoline prices is Middle East tension among oil producing countries. At press time, the average price per barrel of crude oil on the New York Mercantile Exchange was $104.32.
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