All That's Trucking

Opportunities in a Lower Fuel Price Environment

April 17, 2015

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Do lower fuel prices offer an opportunity to get some business back from rail? Photo by Jim Park.
Do lower fuel prices offer an opportunity to get some business back from rail? Photo by Jim Park.

Other than enjoying lower fuel costs, how can trucking companies take advantage of current low prices for diesel fuel?

Analysts at business management consulting firm Strategy& (formerly Booz & Co.), suggested that fleets take the opportunity to adjust their networks to focus more on speed of delivery in cases where there's been some trade-off for fuel costs, and go after some business that's currently moving on rail.

In a report on "The Impact of Reduced Oil Prices on the Transportation Sector," Andrew Tipping, Andrew Schmahl and Fred Duiven point out that assuming 5 to 7 mpg and an oil price of $60 to $80 per barrel, the line-haul cost per container mile is $1.82 for trucks versus $0.37 for rail, according to the U.S. Department of Transportation. "Lower oil prices, however, will narrow that relative price gap."

Since reduced fuel costs allow trucking to be more competitive compared with rail, they suggest trucking companies look to recapture customers they may have previously lost when oil prices were higher. In fact, they say, it's already been happening:

"In fact, according to the Journal of Commerce, a set of U.S. shippers surveyed during the third quarter of 2014 decided to shift freight from intermodal trains to trucks, rather than the reverse, for the first time in five years. Some of the shift was due to rail congestion caused by surging traffic in 2014, but lower diesel prices accelerated the shift, especially among the more frustrated shippers. Trucking companies should seek to further exploit this trend by highlighting the stronger speed/cost trade-off available to customers today."

Lower fuel costs also allow trucking companies adjust their networks and routes to better serve their customers on the basis of speed and convenience, they say.

Questions Strategy& suggests fleets ask themselves:
  • Should investments in alternative fuel vehicle pilots continue apace?
  • Which current rail customers are the ripest targets for poaching?
  • What adjustments can/should be made to the network to optimize speed/convenience for customers?

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Author Bio

Deborah Lockridge

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Editor-in-Chief

All That's Trucking blog is just that – the editor's take on anything and everything related to trucking, with the help of guest posts from other HDT editors. Author Deborah Lockridge's career as an award-winning trucking journalist started in 1990.

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