Fuel Expenses May Generate Supply Chain Concerns

Prior to these recent gains, diesel prices sank for 12 straight weeks, falling a cumulative 50 cents during that period

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Diesel prices saw gains for the seventh straight week, according to the Department of Energy’s Energy Information Administration (EIA).

The price per gallon hit $4.026, driven by a 6.1 cent weekly gain, with prices rising a cumulative 31.7 cents over the last seven weeks. This marks the first time diesel prices have cracked $4 per gallon since the week of May 14, when it checked in at $4.004 per gallon.

Prior to these recent gains, diesel prices sank for 12 straight weeks, falling a cumulative 50 cents during that period.

In its recently updated short-term energy outlook, the EIA is calling for diesel prices to average $3.84 per gallon in 2012 and $3.62 in 2013 (down from previous estimates of $3.90 and $3.87, respectively), with WTI crude oil expected to hit $93.90 per barrel in 2012 and $90.25 in 2013 (down from previous estimates of $96.80 and $97.00, respectively).

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.

What’s more, shippers have repeatedly told LM they are constantly monitoring fuel prices, as they relate to freight rates and the overall costs of doing business.

And shippers continue to take steps to minimize the impact of fluctuating fuel costs. Over the years, they have maintained that this is imperative as higher diesel prices have the potential to hinder growth and increase operating costs, which will, in turn, force them to raise rates and offset the increased prices to consumers.

The price per barrel for oil was at $92.56 at press time, with the Associated Press reporting that analysts estimated that supplies of U.S. crude and gasoline likely dropped last week. The AP added that crude has hovered near $90 for the last few weeks as investors weigh weak global economic growth against possible monetary and fiscal stimulus measures.

The price per barrel of oil was at $95.97 late yesterday, which is up from the mid-$70s range as recently as late June.


About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

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