Posted on 08/08/22

The Effect Of Rising Fuel Prices On Auto Transporters

The Effect Of Rising Fuel Prices On Auto Transporters

Many auto transport companies are attempting to reduce and reallocate their costs in response to rising prices. They have also begun to reevaluate the methods they used previously. They seek to find ways to reduce costs and improve efficiencies.

No matter what mode of transportation you choose, the energy required to move a vehicle is a significant part of its overall cost.

Businesses are now being forced to look at their options, including continuing to lose money, raising the prices they charge customers or finding creative ways to reduce costs.

According to data, the average national diesel price was $5.14 per gallon on April 4, 2022. This represents a nearly $2 increase in diesel prices compared to last year.

What is the impact of this on auto transporting companies? And what adaptation strategies are they able to employ?

Why are Fuel Prices so High?

The rise in oil prices is the main reason for fuel prices rising. Although Russia's invasion in Ukraine is the latest factor that has driven crude oil prices higher, the market was already moving.

After promising their shareholders financial discipline, oil corporations are reluctantly drilling. The national average price per gallon of gasoline has risen to $4.589 from $3.043 last year.

For the first time ever, every state has an average of more than $4 per gallon. The retail diesel price reached an all-time record high of $5.577 per gallon. This is 76% more than the previous year.

The Impact of Rising Fuel Prices

There are many indicators that show the effects of rising gas prices. Volatile gas prices have an effect on virtually all modes of efficient transportation, except electric vehicles.

Soaring fuel prices may have not caused demand destruction (or the extent to which high prices affect consumer behavior), but it is possible. The effects are still spreading across the economy.

Gas prices have a negative impact on disposable income. Businesses also face rising costs, which could or may not be passed onto customers.

These are just a few of the effects of rising fuel prices on shipping companies:

Truckload shipping has an impact

Rising diesel prices directly affect trucking companies as well as the customers who use these services. This problem is compounded by a lack of labor and increased demand for faster shipping.

To compensate for rising oil prices, trucking companies add a standard fuel surcharge per load. The fuel surcharge helps companies to maintain profitability, despite rising fuel prices.

Trucking industry profits are also affected by empty-cargo "deadhead", post-delivery kilometers, and other costs, which further drives up prices.

It might also be difficult for mechanics to pay the costs of calling roadside assistance if a truck is damaged while on the road.

Shipping ocean freight: Impact

The current energy prices are driving up the price of ocean freight transport . This is already struggling due to the increased costs of ocean freight transport .

As the potential to make a profit is becoming increasingly challenging, companies are turning to other avenues. This is due to the low costs and higher margins associated to economic activity. It often stands out from other methods.

Like trucking companies, ocean carriers pass these costs on to their customers as surcharges. The cost of fuel is the largest cost. A significant number of ocean carriers will also practice "slow steaming" aboard ships.

Slow steaming is slowing down, often to less than 15 knots rather than the usual speed greater than 22 knots to reduce fuel consumption. This is similar to the way trucking companies control the maximum speed of their trucks to reduce fuel consumption.

This method of reducing costs can make shipping times more difficult than usual, but it saves money for the carriers. They also reduce the pollution they create.

Air cargo shipping: Impact

Air cargo has seen a rise in popularity over the past few years because many companies like Crocs Inc. have increased their investment to avoid supply chain slowdowns that could affect other options.

It is becoming more difficult to explain why jet fuel prices are rising.

Before today's rising prices and disorganized supply chains, it was well-known that air freight was one of the most expensive methods for shipping goods.

The International Air Transport Association reports that the cost of jet fuel has increased by 82% over the past year, reaching its highest point since 2008.

Goods and supplies are often loaded into the cargo hold of commercial aircraft that are already in operation when they are being transported by air.

The drop in passenger airline travel has had a significant impact on the availability of air freight space on passenger aircraft. This is not surprising as it accounts for over half of all air freight.

Rail shipping: Impact

It is possible that, as gasoline demand continues to climb, many businesses will start to consider rail freight as a more cost-effective and environmentally-friendly choice for moving their products, at least at some point during their journey.

According to the Federal Railroad Administration trains are four times more fuel-efficient than trucks, and can move one ton of cargo at 470 miles per gallon diesel fuel. Trucks can move only one ton of product at 200 m/g of fuel.

Due to the higher efficiency, the fuel required contributes less to total running costs than other options.

Businesses can cut costs and increase profit margins with better efficiency, which opens up new opportunities for many companies that would not have been able to do so in the past.

Accounting implications

Companies that include freight costs in their inventory costing follow the Generally Accepted Accounting Practices (U.S. GAAP).

Manufacturers should evaluate the possibility of unusual freight costs in current operating environments to determine if additional expenses are being recorded in accordance with Section 330-10-30-7 Accounting Standards Codification.

Distributors must be aware of the potential impact on margins from additional freight expenses. They should also keep an eye on inventory's net realizable or lower cost.

As they examine their operations, the modes of transport used by a company will be at the forefront.

Flexibility and knowledge are essential. It is also important to look for solutions that might have been overlooked. Because supply chain problems that affect all industries will continue to impact them in the future,

How Autotransporters Can Manage Rising Fuel Charges

There are many factors that can cause fuel prices to rise.

  • Driver behavior
  • Gas prices
  • The microeconomics and supply-demand relationship
  • Geopolitics and global oil production
  • Currency volatility
  • Extreme weather

To help lower operational costs, however, you can take the following steps:

Actively minimize deadheads

Autotransporters can track miles that don't directly generate revenue and work to reduce them. A survey by ATRI in 2020 found that 20% of miles were deadhead miles.

When fuel prices are high, a large percentage of deadhead mileage can have a significant impact on your bottom line.

To reduce deadhead, the best ways to cut down on deadhead are to find loads that can be used for trips and keep the distance required for the pickup as short.

This is possible by understanding the loads available better so that you can plan routes that reduce the number of empty kilometers.

The Carrier leaderboard displays more than 25,000 loads daily. It also offers load recommendations based upon location, minimum deadhead mileage, and previous bookings.

It's much easier to maximize revenue-generating mileage when you have access to diverse loads and information about the freight being shipped.

Reduce dwell time

Streamlining routines and processes can reduce dwell time, such as efficient check-in and out procedures, no-touch palletized freight, and clean paperwork.

It is almost impossible to eliminate all dwell time, but it is possible. C.H. is one example of a company that provides third-party logistics (3PL). Robinson works with many "shippers of preference" to make sure that live load freight is handled efficiently and in the shortest time possible.

Another way to cut down on wasted time is to collaborate with drop trailer providers. Because there is virtually no dwell time, truckers can quickly detach their trailers while transporting power-only loads.

C.H. Robinson offers drop trailer programs. These have carried over 500,000 power-only loads in 2021 and averaged more than 40,000 loads over the past four months (January 2022-April 2022).

Maximize your gas station savings

A truck travels approximately 120,000 miles per year. A survey by WEX Inc. in 2019 found that 23 percent of fleets considered fuel cost the greatest operational problem they faced.

This percentage has increased significantly due to the current economic environment. Due to the high fuel costs, most carriers participate in initiatives that protect their profit margins while reducing their risk of fuel price fluctuations.

These programs can be very cost-effective if used in an ongoing fashion. C.H. Robinson's Carrier Advantage TM Fuel Card could save you $0.37- $0.40 per gallon. This would be a savings of more than $10,000 per vehicle.

Based on an analysis of the previous quarter, fuel savings at TA Petro and TA Express and savings at participating Casey's Commercial stores were estimated to average between 37 and 40c per gallon. These estimates can change at any time without notice.

Last Thoughts

Rising gas prices have major implications for auto transporters in terms of operational expenses, reallocations of funds, routing changes, and freight schedules.

Auto transporters can take advantage of austerity measures to reduce losses caused by the global fuel price rise.

These measures include minimizing deadhead and reducing dwell time. They also maximize gas station savings. These techniques will incur additional costs due to the time required for implementation.

Move Car Auto Transport will help you to avoid worrying about fluctuations in fuel prices by helping you to lock in a reasonable price for your transportation needs. Get a free quote today.