5 Ways Low Fuel Prices Affect Carriers

Springtime has arrived for the freight industry, and as the temperature rises so do freight rates.

Although seasonal trends are back in line with previous years, freight rates from DAT RateView signify that van rates are down by approximately 5.1% from last year. This roughly equals out to about a 10-cent difference per mile for freights and vans.

However, stats also show that if you subtract the fuel surcharge, the average linehaul rate is actually about 9 cents higher this year than last.
Diesel rates also contribute to the price of long-haul freights.

By the end of February, diesel prices were around $2.90 per gallon, which is just over $1.11 cheaper than last year. Therefore, we’re looking at an average 29 cent fuel surcharge per mile, 11 cents cheaper than 2014.

The following are five specific ways that lower oil prices are altering the market this year.

1) Cheaper Cost of Business

The lower oil prices fall, the less expensive it is to run trucks. Thanks to dramatic decreases in fuel costs, carriers on average are spending 18.5 cents less per mile on their fuel compared with 2014. This contributes to the flow of business and improves the industry overall.

2) Increased Truckload Use

Lower fuel costs are reducing congestion on rails and causing shippers to choose freight over intermodal rails. This shift hasn’t happened since 2010, and since rails aren’t as affected by fuel costs as freights, the result is cheaper freight costs over rail shipping.

3) Customer Needs Are Changing

As oil prices drop, the demand for drilling also loses its luster. This means that thoroughfares are quieter and so is competition amongst drivers. Customers therefore opt for freights over trucks.

4) Freighters Can Pursue Alternative Markets

Consumer spending also affects the industry and changes with the drop in oil prices. Tools like Hot Market Maps in DAT RateView allow carriers to see where shifts are happening within the market. Because carriers aren’t as concerned about fuel prices they can target where the demand is for their trucks.

5) Increased Earnings

Carriers who work on contracts benefit greatly from the drop in fuel prices. These carriers are frequently paid surcharges regardless of the fluctuation of the market. When fuel prices bottom out as they have recently, the result is an increase in profit for carriers.

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