Lower diesel prices do not hinder intermodal

Proponents of intermodal transportation often point to fuel savings as a significant benefit of leveraging intermodal for moving freight. Naturally, there are also other things that make the intermodal case for them, too, like solid service levels and decent transit times that offer what many rail and intermodal service providers describe as “truck-like” quality.

But back to diesel prices. If you read this site closely, then you are aware of the fact that diesel prices have gone down for nine consecutive weeks. That is right, nine. And before that, they were up for nearly three months straight and soared above the $4 per gallon mark. In the last nine weeks, though, much has happened to bring down both gasoline and oil prices. Some of it pertains to the troubling economic situation in Europe, slow growth in China, and, of course, disharmony of all kinds in OPEC-based nations.

When diesel prices started going down, I was wondering if this would create some type of instant and widespread modal shift for shippers to move from intermodal back to truckload, but after speaking with Steve Van Kirk from Schneider National, I soon learned my assumption was not entirely correct for a few different reasons.

“[Shippers] are very concerned about fuel prices,” he said. “And that has really helped intermodal growth. While it is true diesel is down from previous levels, it is still fairly close to $4 per gallon. If you look at that price point on a historical basis, it is high. And if you anticipate where oil and diesel prices are heading in the coming years, most people will likely tell you prices are going up.”

What is currently happening now is what Van Kirk referred to as a market blip and for shippers with a long-term perspective of managing their freight, they see that intermodal will play a key part for them in managing their fuel costs as costs fluctuate and increase going forward.

Oil and gasoline prices, while often volatile, are in a manageable place at least for the time being. Intermodal shippers are smart to sit tight as prices do their thing. Through the first 20+ weeks of the year intermodal container and trailer loadings are up just about 3 percent. That is not a bad number at all, especially when one thinks about diesel prices have been lately-and where they might be headed….again.