It’s no surprise that one of the hottest topics in the world lately is the pain felt at the pump. Rising fuel prices have been at an all-time high, surpassing the costs since 2008, and these prices will only continue to climb. As a result, businesses are being forced to pay more to operate, causing a ripple effect for everyone.

Wait, How Did This Even Start? 

You may be wondering how fuel prices even got to this all-time high. Well, they can’t be blamed on any specific event or occurrence as many different factors caused fuel prices to surge. 

World Conflict

World conflict is one issue affecting fuel prices, specifically those in Western Europe. The Russia-Ukraine war has been brewing for some time now, and due to attacks, the United States among others has stopped imports, like oil, coming from Russia.

Russia is one of the world’s largest oil exporters, exporting nearly eight million barrels in one month. The drastic change in accepting oil imports from Russia has caused the price of fuel to rise because it’s not as available as it once was.  

The Dreaded “C” Word

Another catalyst for the spike in fuel prices is the continual effect of Covid-19. I’m sure you’re tired of hearing it, but the world is still feeling the pains of the virus while we aim to return to life. Recently, Covid forced Chinese ports to close for a brief period and now that the ports are opening back up, supply cannot keep up with demand. 

As people try to live alongside Covid-19, office workers are going back to in-person work and people are returning to travel after two years of staying put. With more people leaving their homes, it’s causing a greater demand for fuel while our supply is limited. 

The Effects of These Issues

Fuel prices are affecting everyone, including consumers, and businesses, but those in the logistics industry are seeing greater challenges. That’s because the logistics sector has seen disruption after disruption. First, with the issues started by the pandemic, then the port congestion once businesses began to reopen, and so on to now with increased fuel prices. This industry has barely had a moment to catch its breath. 

Logistics is at a crossroads; with the United States economy looking at a recession, and world conflicts yet to improve, it’s going to be hard for fuel prices to drop back to normal levels until everything balances out.

How Bad is it Actually?

Even though everyone has been hearing and seeing the high fuel prices, how bad are these prices? Well, in June, the U.S. national average price per gallon topped $5, which is 50 percent higher than it was this time last year. Even pre-pandemic prices were at $2.55 average for that month, showing the direct impact that covid and other issues have caused.  

These prices only continue to rise when we talk about the cost of diesel fuel. This type is often more expensive than regular gas, and this is what truck drivers use to fill up their tanks. In June, diesel fuel averaged $5.50 per gallon in the U.S., which is a .50-cent increase from regular fuel. While this increase seems small, when truckers are driving over 500 miles per day, the extra cost can add up quickly.  

President Joe Biden has tried to take steps to lower fuel prices in the United States. He has called on Congress to do a Federal Gas Tax Holiday, releasing the charges that the federal government has on fuel. Typically, the government charges an 18-cent tax per gallon on gasoline and a 24-cent tax per gallon on diesel, but President Biden has called for the Tax Holiday to give Americans breathing room as they battle other economic issues like inflation.

High fuel prices are not an issue solely faced by the United States. In fact, gas prices in the United States are on the lower end of the spectrum compared to other countries. For example, while the average in June for the United States was $5 per gallon, in Germany, it averaged $8.26 per liter, while one of the highest fuel prices was in Hong Kong, where gas was $10.71 per liter in June.

How Do High Fuel Prices Impact You?

So, how do the rising fuel prices affect those in the logistics industry? Well, let’s take a look.

Shippers

Increased fuel prices mean higher logistics costs because it’s now more expensive to move their products from point A to point B.

Consumers

Consumers see a direct cost increase on products due to fuel prices. Because it now costs more for shippers to move their products to their destinations, they must also raise the price of their products to continue to make a profit. 

Carriers

The biggest issue carriers are seeing with the high fuel prices is the impact on their income. Their operating costs have increased due to the rising fuel and product prices. And with rates lower than they’ve been throughout the pandemic, many carriers have decided to put a pause on driving until the market return to normal. This could cause added chaos to the market. Should more carriers halt their work, there could be an imbalance in the industry, causing more backlogs and shipping delays as a result.

Trinity is Here to Help

As an experienced third-party logistics company with over 40 years in business, we’ve worked with many shippers and motor carriers through the ups and downs faced in this industry, including this one. We’ve seen it all and are here to help you through these troubling times.

Whether you’re a shipper looking for better logistics management or a motor carrier looking for dedicated freight to keep you consistently moving, you can find all the solutions you need with our People-Centric approach.

Get connected with us today so you can start having Trinity Logistics, a Burris Logistics Company, by your side, no matter the state of the market. 

There’s been a lot thrown at supply chains lately. The up and down Covid-19 surges, material shortages, increased consumer demand, and more. And we can’t forget to mention other factors like the new covid variants, port congestion, and dock delays.  

Many of you might be wondering what Trinity is doing to stay agile during these supply chain bottlenecks. Let’s first quickly dive into what the supply chain is currently facing, and then we’ll go into how Trinity keeps moving forward.  

Current Supply Chain Bottlenecks 

Labor Shortages 

I’m sure you’ve heard and seen all the effects of the labor shortages today. Whether the companies are big or small, or in fast-food or logistics, every single industry is facing this issue. 

Over the past 22 months, businesses have been hit hard with workers’ pandemic-related absences. According to an analysis from the Integrated Benefits Institute, these absences have cost employers more than $78.4 billion. That’s nearly $1 billion every week. 

Along with this, the new omicron variant is leading to more staff shortages as people take sick leave and suppliers navigate new restrictions. This includes factoring in China’s zero-COVID strategy, which is likely to continue to disrupt both production and transportation of goods, possibly for the entire year.  

However, backorders in many sectors have been filled, but consumer demand may well be cooling now that furloughs have ended, and interest rates are beginning to rise. So, some companies might end up with an oversupply of goods after everything is said and done.  

While some people thought that these issues would stay in 2021, the start of 2022 is showing no signs of slowing down these disruptions.  

The beginning of this year has been filled with high levels of return volume from the holiday season, along with the suspension of air on-call pickups for packages. All these issues are mixed effects from weather, omicron, labor shortages, and more.  

Struggling to Keep Shelves Full 

A direct effect of the worldwide labor shortages is businesses struggling to keep shelves stocked. While Covid-19  rampages across the country, it’s not just healthcare and hospitality businesses feeling the effects. Grocery stores are getting gut-punched by the virus as well. 

Product shortages have been widespread throughout these 22 months of the pandemic. These shortages have varied in many different products, from toilet paper and hand sanitizer to different types of meat to even bread and soda. As a result, empty shelves have returned at supermarkets as grocery employees call out sick and truckloads of food arrive late.  

While all companies feel the effects of empty shelves, shipping companies, like FedEx are especially struggling with on-time delivery of packages and products due to the massive truck driver shortage nationwide. Unfortunately, the only solution currently for these issues is time.  

Ongoing efforts are continually in use to increase the recruitment and retention of truck drivers to combat these supply chain issues and stop bottlenecks from occurring.  

Struggling Imports 

Port congestion and backup is another huge issue facing the logistics industry and the entire world right now. Ports worldwide are seeing high wait times and a lower percentage of on-time delivery. In addition, many containers and ships are forced to dock and wait until they can be unloaded due to labor shortages.  

Although many different countries are facing this congestion and delay, no other is struggling more than China. Covid-19 flare-ups in China are straining supply chains as authorities tighten movement restrictions in various cities to stamp out the virus. 

Ningbo, a port city of around 8 million, is dealing with a partial lockdown. Its Beilun district has been especially hard hit, and that’s spelled major problems for the shipping industry. According to The Loadstar, “Many truckers live in Beilun, and there are complicated Covid-19 control policies there, so it’s extremely difficult to bring containers in or out.”  

With the Chinese New Year approaching, some cargo has been rerouted to the Port of Shanghai, which is already congested, The Loadstar reported. In addition, many smaller shipping services providers have already suspended operations this year ahead of the holiday, which starts on February 1^st.  

No Signs of Slowing Consumer Demand 

As of right now, however, demand is stronger than ever and shows no indications of an immediate post-holiday crash. As a result, changes on the demand front are likely to be slow and steady, leading to gradual market shifts over the next several months.  

Combined data from the OTVI and the OTRI indicates that accepted volumes were up three percent year-over-year in early December. Additionally, tender rejections are currently down about 25 percent year-over-year. Rejection rates are at their lowest levels since July 2020.  

Decreasing tender rejections indicates that freight is being moved at contract rates, which is a hopeful sign for shippers. Still, with a rejection rate of over 19 percent, strong demand and constrained capacity continue to stress the market.  

Unfortunately for shippers, spot and contract rates have continued to climb as demand surges, shortages drag on, and peak retail season continues. In early December, dry van spot rates rose to $3 per mile for the first time ever. Likewise, dry van contract rates reached an all-time high – $2.96 per mile – simultaneously, according to Arrive’s December market update. 

Shippers that can create more flexibility in their transportation strategies will fare best as conditions gradually improve in the upcoming year. Moving away from annual RFP’s in favor of shorter contracts, one-way shippers can take full advantage of any upcoming rate drops. While these shippers are also exposing themselves to slightly more risk in the event of unexpected rate hikes, taking a chance might pay off in 2022. 

How Trinity is Here to Help 

Keep You Updated 

At Trinity, we make sure we keep you up to date on all the industry’s information and news. We provide: 

• our monthly freight market updates 
• weekly news updates 
• monthly customer newsletters with industry-specific updates,  
• communications from your representative.  

Giving You The Trinity Experience 

Along with giving up-to-date news and information regarding every industry, we are also here to provide you with exceptional service and communication, especially when facing these bottlenecks. 

Hear from some of our Team Member Experts on how Trinity is staying agile during these times: 

• “Labor Shortage at the shipper or receiver due to COVID outbreak and/or protocols – day of pickup or delivery. Not a whole lot we can ‘solve’ but providing everyone involved with a friendly, calm, timely, communication goes a long way. We often talk about drivers but one area of our industry that seems to get less press are those shippers/receiver teams. The good ones are gold baby!” – Benjamin Bowne, Sales Executive 

• “I would echo Mr. Bowne’s assessment. Handling the conversations with carriers, customers, and warehouse alike with care and empathy goes a long way. Everyone has been impacted over the last year by the pandemic, it’s the experience that our overall Team provides throughout the transaction that has proven invaluable. This is echoed in the feedback we have received from all the parties throughout the pandemic. We care about what we do.” – Chad Eckland, Director of Sales 

• “We are being more agile by focusing on internal as well as external adjustments. A large percentage of our staff are working remote to avoid being short manpower due to illness. Those that are in person are participating in higher safety standards within each location. We are asking customers what are their Covid standards, when applicable, and how they are adjusting so we can conform to their needs. We are checking on trends for spiking locations across the U.S. to see how it will affect imports/exports and its affects of capacity in that area. This is a little harder to do but definitely on the radar. If a shipper/receiver is affected, then we prompt carriers to know what expected delays may occur while costing that into what we are offering carrier.” – Tony Austin, Director of Sales 

• “In addition to all the good points already mentioned, I would add that even though I always try to consider any and all viable solutions for my customers, I do a little extra now, because of the circumstances, to help educate customers on conditions, market changes, expectations, and challenges. In addition, I emphasize that I do look under EVERY rock to help them get their freight moved by leveraging all of the modes and resources we have available, as well as be thorough in understanding the factors to be considered in moving their freight (flexibility in dates, rates, modes?). I feel like we have more detailed and personalized conversations, and I provide an added level of insight to show customers that I am truly being a partner to help them through this difficult time.” – Kimberly Meadows, Sales Executive 

We Are Experts 

While this may be our first pandemic, after 40 years of being in this industry, it certainly isn’t our first season of supply chain disruption, high freight volumes and rates, or tight capacity.  

We are well versed and experienced in many different situations, and we know when and how to pivot quickly and keep business moving forward. We follow through on our efforts. When issues arise, we work until they are resolved and keep open communication every step of the way.  

We Help You Plan 

You can always use your Trinity relationship to discuss current and upcoming projects. This helps us give you things to look out for to keep your transportation aspect of business more stable and reliable.  

Having a solid relationship with an expert like Trinity will prove to be your largest asset no matter what supply chain bottlenecks you may face.

If your ready to get support in your logistics with Trinity Logistics, no matter what issue the supply chain has, lets get connected.

By: Christine Morris