Fueled Up

Fueled Up

Laments about energy costs have been as much a part of freight transportation over the last few years as tractor-trailers and re-weighing charges, so there was extra elation evident in the voice of one trucking company president the other day when he told us about his trip through the Midwest. He'd found, he said with a tone of amazement, gasoline at $2.09 a gallon.

That was gasoline for his car, he cautioned, and not diesel for his fleet of trucks. But the message was clear: the era of cheaper, if not entirely cheap, fuel was on the horizon.

The broad numbers from the government certainly make it look that way.

Average diesel prices across the country fell 4.9 cents per gallon last week to $2.546 per gallon. In the Midwest, the decline was slightly smaller, but the prices slipped down to $2.467 a gallon.

The diesel price declines compared to last year are probably somewhat misleading. A year ago, after all, the aftermath of Hurricane Katrina sent prices across oil markets soaring. 

But the post-Katrina prices weren't far off the highs that fuel prices hit toward the end of the summer, after a series of steady and gradual increases peaked at a national average of $3.065 per gallon the week ending Aug. 14. The average price in California last week of $2.835 a gallon may not sound like much of a bargain, but the national high the week of Oct. 2 was nearly 43 cents better than the price a year ago.

And now, after seven straight weeks of declines, the average price of diesel is, well, pretty much what it was in March. Looking at the whole year, in other words, diesel prices are just about flat. That doesn't mean the recent free-fall in pump prices isn't great news, but it also suggests that shippers shouldn't be toasting the end of soaring fuel prices and making bonfires of their energy conservation strategies.

There is, we believe, a bright side to the rising energy costs of recent years. Pressed by those costs, shippers, logistics providers and carriers of all modes have found new ways to operate more efficiently. Beyond merely moving between modes to mitigate costs, smart shippers have consolidated deliveries, dispersed inventory more efficiently and coordinated more closely with carriers and other shippers to slim down supply chains.

They have used strategies that have brought enormous savings in the face of rising oil prices.

The good news for shippers is that those oil prices, which seemed to be on an inexorable path upward this summer, are looking softer every day. The Energy Information Administration said prices rose partly because oil companies stockpiled to prepare for possible supply disruptions during the hurricane season. "However, when these expectations did not materialize, the sell-off of oil contracts began and prices plummeted," the agency said.

But for shippers and transport carriers, there's no reason to sell off the cost-saving strategies they have been using.

If the savings helped the bottom line at $3.07 a gallon, just imagine how good they'll look at $2.09.