“The drop in the cost of oil is a huge factor in the airline industry, where 30 percent of all expenses are for fuel. But airlines, along with other industries with large fuel expenses, have been slow to respond with lower prices," according to Suzanna Capelouto with NPR.
One of the most volatile pieces of the transportation industry in the past few months has been the price of diesel fuel. Long gone are the truck drivers insisting on more pay since fuel prices are increasing and are now replaced with customers asking for the cost savings to be passed along from dropping fuel prices.
Looking at the chart below we can see where diesel started dropping significantly in fourth quarter of 2014 and continued its slide to our current week.
From the driver’s perspective
While fuel costs have come down there are many other factors that have increased the driver’s costs. Driver’s wages and increases in pay are needed, shortage of viable work force, additional charges for equipment meeting government specifications, and pushes for electronic on board recorders and new technologies are a cost that driver’s have had to absorb for quite some time.
From the customer’s perspective
When oil prices shot up a few years ago many transportation and delivery businesses started adding fuel surcharges to their prices as a way to counteract absorbing all the losses in higher fuel prices. Now prices are falling, but the surcharges remain which leaves many customer’s wondering what the surcharge is needed for now. If the rising cost of fuel equated to higher freight rates then by all logic lower fuel prices should equal lower freight rates.
In the transportation business we all need to be aware of the costs and factors that drive the pricing in markets. Fuel surcharges and fluctuating prices on fuel should be addressed timely so that both parties are protected. If cost savings are to be realized on shipments these savings should be passed along to the customers. One word of caution, the price of fuel will almost certainly rise in a very short amount of time so be sure your customers understand the current as well as the forecasted market data for the coming future.