Inflation and Low Cost LTL Freight
Rising inflation has become a global problem in recent months, driven by the sudden spike in the cost of diesel fuel. Gone are the days of the early pandemic, when the sudden collapse in demand due to global shutdowns resulted in lower prices for gas and diesel. As road and rail traffic recovered throughout 2021, fuel prices climbed steadily. However, the sharp jump in cost felt recently occurred with Russia’s invasion of Ukraine in February 2022, an action that is causing ripple effects around the world and in every industry.
As an exporter of diesel (and crude oil from which diesel is made), Russia has been a major supplier to European countries, which depends on Russia for 10% of its diesel. Sanctions on the purchase of oil from Russia have left countries around the world scrambling for alternatives to meet demand. Although the market is global, making it possible for affected nations to find new sources for fuel, additional complications have made it difficult to compensate for the loss of Russian supplies.
Fuel Supply Bottleneck
One inhibiting factor is a lack of refinery capacity to ramp up production of diesel. One of the largest refineries in Saudi Arabia has been undergoing maintenance, restricting the country’s ability to increase exports. Europe and North America lack the refineries to ramp up production enough to keep up with demand; since 2019, refining capacity has shrunk 5% in North America and 6% in Europe.
Although consumers around the globe may be most aware of fuel market impacts in the cost of gasoline at the pump, it’s the cost of diesel that has a greater effect on the economy at large. Diesel fuel is vital for agriculture and manufacturing as well as transportation, so a rise in diesel costs has compounding effects that touch every sector. According to the U.S. Energy Information Administration, as of April 18, 2022, diesel was selling for a national average of $5.10 per gallon, up nearly two dollars per gallon from the previous year. In addition, while the cost of gasoline has had a modest but noticeable decline since hitting its peak, the cost of diesel has plateaued at record highs since it spiked in mid-March.
Of course, the price of fuel has a direct effect on the cost of shipping. It’s being felt especially acutely in the trucking industry, which has been suffering from numerous challenges since the start of the pandemic. Lack of equipment and parts, paired with a shortage of qualified drivers, has made it difficult for trucking companies to meet the surge in demand for their services. Now increased operating expenses, driven primarily by the high cost of diesel, are impacting their bottom line. Customers have felt this in the form of general rate increases and fuel surcharges. Expanding intermodal operations is one method trucking companies are using to improve fuel efficiency and thus hold down costs.
Keeping Costs Low For LTL Freight
When costs are rising everywhere, it’s more important than ever for small and medium-sized shippers to find economical and reliable means to transport goods. Clear Lane Freight was founded in order to fill the need for cost-effective long-haul LTL service, a need that has only grown in the decade since. Our system relies on regional LTL partners for reliable pickup and delivery, connected by intermodal service between strategically based hubs. This combination allows us to hold down costs and pass savings on to our customers. In exchange for slightly longer transit times, we provide efficient economy service for goods that are less time-sensitive.
Because our system is non-asset-based, Clear Lane has the flexibility to find the best solution for your needs at a cost you can afford. Throughout the last two years, we’ve been building our partnerships and strengthening our customer service to help our customers navigate the changing business landscape. To find out more about how Clear Lane Freight can provide efficient, competitively priced shipping for your company, contact us here