There was a lot of excitement here at Evans Distribution Systems recently when we received word that we were included on Inbound Logistics list of Top 100 3PL Providers for the 10th consecutive year. This led us to look back over the past years (they go surprisingly fast, don’t they?) and some of the trends that we’ve seen in the industry.
Undoubtedly one of the biggest would be the price increase we’ve seen over the years in fuel prices. The chart below shows the increase in the U.S. Average (as calculated based on the EIA weekly average) from 2003 up to the average YTD for 2012. Just for comparison sake I included both regular and diesel fuel, although technically we are speaking about diesel effects on the industry here.
When you hear the media talk about how the price of gas affects everything we buy it is pretty easy to understand when you look at the increases over the past ten years. If most trucks average around six miles per gallon of diesel fuel and we look at a truckload of freight that travels 300 miles from a plant, farm or warehouse to the end destination the cost of fuel on that load has increased 262%, from about $75.00 in 2003 to about $197.00 today.
Fuel surcharges are typical in the trucking industry and have helped alleviate some of the cost increases for trucking companies and owner-operators, but the consumer typically helps to pay for these increases through higher prices on the shelf.
You can expect some additional increases in the future as several factors combine in the trucking industry requiring rate increases: 1) Fuel prices are expected to continue trending upward, 2) Capacity will continue to tighten as drivers retire at a much faster rate than new drivers enter the industry, and 3) Equipment costs are becoming more expensive as the EPA requires upgrades to more environmentally friendly engines, which cost more.
I only have to think back a few years to remember when I could pick-up a gallon of milk for $1.99. Today that gallon of milk is $2.49, but I can easily see this creeping up to $2.99 very soon.