The Oil Freefall: How It Affects Haulage Companies
By Norman Dulwich
The recent crash in the price of oil is a boon for haulage companies - not just in the UK but all over the world. As helpful as lower oil prices are, there are many other opportunities - as well as pitfalls - that can affect your bottom line when it comes to transporting cargo.
Fluctuating Gas and Diesel Prices
If you've been driving a gas-powered vehicle while delivering goods around the country, then you've no doubt felt the impact of lower gas prices in your fuel expenses. If you've been driving a diesel-fuelled vehicle, however, it will take some time before you begin to really feel the impact of lower oil prices.
Diesel is not as reactive to shifts in the price of crude oil when compared to gas. The market is just smaller compared to gasoline, which reduces the competitive drive to lower prices. Diesel is also much harder to produce during the winter months, while demand for diesel as a heating fuel shifts prices up as well.
This means haulage companies using diesel-fuelled vehicles will only benefit when the price of oil stays down for around a few months more. Prices for diesel will start to ease once winter draws to a close, as demand for heating fuel dies down while the manufacturing process for diesel becomes easier.
Gas-powered vehicles, on the other hand, will see an uptick in price once summer comes around. Gas needs to be reformulated for warmer temperatures, while an increasing number of drivers going on road trips will drive up demand for the stuff.
Stronger Consumer Confidence
Haulage companies are part of the transportation chain that delivers goods from factories to store shelves. Lower fuel prices mean lower prices for consumer goods, which in turn drives up demand for said consumer goods.
Stronger consumer confidence is always good for businesses of any kind - and hauliers are no exception. This is a good thing for hauliers that work delivering the aforementioned consumer goods to and from their various destinations. This is especially useful information for hauliers that deliver parcels from digital retailers to their customers. But it also means that hauliers need to be prepared for more orders coming their way. One-man couriers will need to adjust their schedules to deal with more work, while larger haulage companies may want to consider expanding their fleets in order to keep up with demand. After all, stronger consumer confidence will not mean much to the haulier if delays and logistical problems turn customers off from using the services.
Shutting Markets and Increased Competition
Lower fuel prices mean that new players will set their sights on a market that was once overlooked - which can be a challenge for existing hauliers. One prominent example is that of Amazon considering setting up its own delivery service in lieu of hiring outside contractors. This notion was attractive enough for the ecommerce giant to consider on its own, but lower fuel prices would spur the company - and many other large players - to move towards in-house deliveries.
Lower fuel prices also means that other smaller players could set up in the transport business. Couple low fuel prices with high consumer demand, and it will be easy to see just how some enterprising groups and individuals could break into the industry.
All this means that existing hauliers must not be complacent in offering competitive services at competitive rates. This is standard advice for any time, but it becomes doubly important now that more and more people are looking at the transport industry with hungry eyes.
Norman Dulwich is a Correspondent for Haulage Exchange, the leading online trade network for the road transport industry in the UK and Europe. It provides services for matching haulage companies with jobs in road transport and haulage work in the domestic and international markets. Over 3,000 transport exchange businesses are networked together through their website, trading jobs and capacity in a safe 'wholesale' environment.
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