Since the beginning of 2016, gasoline prices have been at their lowest point in the last few years. As compared to the price of gasoline last year at this time, the world is seeing much lower prices overall at the pumps—so what effect does that have on the freight industry? Let’s take a look at three of the most common methods of transporting freight and see how the lower gas prices have affected each of them individually. You might be surprised to find out what the effects really are.
Traditionally shipping by air is one of the most expensive methods of freight transport. Of course, this is linked to the high cost of airplane fuel as well as the limited space available for air freight. Since the price of oil per barrel is going down, you might expect to see a slight dip in the cost of air freight. Unfortunately, this isn’t the case.
What translates to lower commercial air fares doesn’t really translate over to the freight side. Most airlines operate just at the edge of making a profit. This means that they are reluctant to lower prices when fuel prices drop. They take advantage of the slight uptick in their profits and sock them away to be able to suffer through one of the more lean times—so if you were planning on taking advantage of lower air freight prices to speed up delivery times, you might want to think again.
Unlike air freight, trucking is much more sensitive to the prices of fuel. Since most trucking lines spend a majority of their overhead on gas, lower prices quickly translate to lower freight prices overall. The lower prices are also a great way to breed competition between carriers. This also benefits someone looking to ship freight as you are now able to play companies off of each other to get the best prices for your shipment.
Overall, expect some savings if you are planning on shipping overland by truck. Just beware oil prices when they go on the rise. It might not be very soon after that truck carrier costs rise to match the new price of fuel.
This is one place that doesn’t see much advantage when fuel prices drop. The whole idea of using intermodal transport is to lower your cost by picking several different carriers who will transfer your freight from one mode to another, say train to truck. The penalty is in time, as cargo must be unloaded and loaded, sometimes several times, to reach the final destination.
Unless you are shipping freight by sea, trucking ends up being much cheaper than intermodal. That is because of the competition and direct correlation between fuel prices and truck freight prices.
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