THE FUTURE OF FUEL PRICING AND THINGS TO COME
Posted: July 29, 2020 |
CPC posted a BLOG on May 20, 2020 that Millions of Americans have sharply reduced their daily transportation activity in every mode worldwide resulting in reduced demand for fuel. COVID-19 and worldwide demand dropping off a cliff cascaded into fuel prices reaching their lowest point in decades. Currently, diesel fuel pricing has leveled off, but still 23% lower than last year. There’s an opportunity to harness these market conditions and lower shipping costs.
The national average price for a gallon of on-highway diesel fell nearly 70 cents from early January to late May, mostly caused by the decrease in demand (COVID-19) and the price battle between Saudi Arabia, Russia and OPEC. Since then prices have stayed flat. The scale of the slump is big and any recovery will be long and slow and there is doubt demand will ever return to levels before the crisis.
One wildcard is state diesel taxes. Today taxes are impacting pricing more than ever and is something to keep an eye on. With demand down, this could lead to a perfect storm as states look to recover lost revenue due to Covid-19. Also, commercial fuel costs vary by region and state diesel taxes can be one of the biggest cost differentiators for a shipper. Be ready, during the months and years ahead as we may see an increase in state-level fuel taxes. With the significant dips in demand for gasoline and diesel, state budgets will likely fall short from collecting taxes on far fewer gallons being purchased causing the pressure to increase taxes.
One tool a Shipper has is to create a customized fuel surcharge scale whereby the threshold starts at current costs. It’s a well-known carrier practice to mark-up fuel substantially. This technique helps carve out the excessive profits and keeps all carriers on the same fuel pricing plan. With the current business environment of lower fuel costs coupled with less demand, carriers of all modes: air, ocean, trucking, parcel and forwarding are now motivated to keep or seize additional market share. Now it’s time to act to reduce shipping costs.
Let CPC perform a free diagnostic to ensure you have the best transportation program.There is no obligation to hire us, but we believe this is a truly unique time in the market place to add incremental cash flow to your bottom-line. Call CPC for expertise and guaranteed savings.