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Keep on Trucking

By September 22, 2015CMF Blog

Goldman cut its crude forecasts this month, saying the global surplus of oil is bigger than it previously thought and that failure to reduce production fast enough may require prices to fall near $20 a barrel to clear the glut. Prices may touch that level when stockpiles are filled to capacity, forcing producers in some areas to cut output, Currie said Wednesday. “The last time we saw a period that was similar to today was 1986, 29 years ago,” he said. “We waited 15 years for oil to start rising again.”

With some level of surety that low oil prices are here to stay, below are three logistics related ideas from our strategic sourcing group:

  • Negotiate hard on FSC (Fuel Surcharge) programs currently in place with your existing freight & logistics providers – Multiple programs are available in the industry.
  • Consider rebalancing your shipping needs since reduced fuel costs allow trucking to be more competitive compared to rail; taking advantage of the stronger speed/cost trade-offs available. You may find increased flexibility over-road is worth the incremental cost over rail.
  • Be aware that lower fuel costs also allow trucking companies to streamline operations around demand, rather than fuel savings. For example, these companies can adjust their networks and routes to better serve their customers on the basis of speed and convenience.

Fuel costs are monitored by the US EIA (United States Energy Information Administration). The on-highway Diesel fuel price is used as proxy for FSC programs offered by trucking carriers. Information on current prices can be found here.

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