Oil’s Impact on Freight Rates

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TLI forecasted oil prices would drop below $30/bbl so it is worth advising the general impact these prices have between rail and dedicated modes.

Fuel makes up 20% of the operating cost of the rail according to the Pittsburg Post-Gazette; however, the rail industry isn’t fond of this drop in energy. The Canadian & US rail industry are seeing lower demand which is largely due to a drop in oil & coal. Even with fuel surcharges the intermodal carriers cannot stave off the correction due to the decrease in demand. Overall prices are falling to the benefit of shippers.

Trucking is largely still more expensive then the rail; however, there has been a push back to trucks lately due to three reasons: visibility, transit time, and mainly the drop in pricing. The drop in pricing is mostly due to fuel, but also supported with more drivers on the road having left the oil/fracking industry aiding capacity.

According to DAT trend lines, Jan’16 YOY comparison in fuel prices is -29%, while the van spot market is down -14% from Jan ’15. It is safe to say prices are falling for the first half of 2016. So with this information available shippers should be analyzing KPI’s to verify their 2016 $/lb is likewise dropping for them.

If you have any questions or want to learn more about how to make the most of your KPI’s, feel free to contact josephm@tli.email
Joseph McDevitt II, Solutions Engineer