In 2016, oil industry market expert Dan Dicker predicted oil could go as high as $120 a barrel sometime in 2018. Not many agreed with his prediction, then or now.
Granted, fuel prices are expected to rise. In June of 2017, crude oil prices were at about $44 a barrel. Today, the U.S. benchmark for the price of oil comes in around $67 per barrel.
The volatile price of oil and, eventually, the price you pay to keep your vehicles fueled up and on the road is out of your hands. Fuel prices can fluctuate based on seemingly innocent changes, such as a speech by a world leader or the unexpected results of an election, as well as on more basic metrics, specifically supply and demand.
It’s enough to strike fear in the heart of any accountant and break a hole in any Fleet budget.
And that’s not all.
We’re running out of truck drivers
For the first time since 2006, the shortage of drivers is the biggest trucking business concern, according to an annual survey by the American Transportation Research Institute. The cost of paying their drivers tops fuel as the trucking industry’s biggest operating expense.
America had a shortage of 51,000 truck drivers at the end of 2017, up from a shortage of 36,000 in the previous year. If trends hold, the truck driver shortage is expected to grow to more than 175,000 by 2026.
“We’re paying a lot more than we ever had,” Robert Ragan, chief financial officer of Melton Truck Lines, recently told CNBC. “We’re in a unique operating environment right now in the transportation industry, where demand is at an all-time high and supply of qualified drivers continues to dwindle. We have a hard time filling our trucks, and pay is skyrocketing.”
Bob Costello, chief economist at the American Trucking Associations, concurs. “It’s as bad as it’s ever been to find drivers. In addition to the sheer lack of drivers, fleets are also suffering from a lack of qualified drivers, which amplifies the effects of the shortage on carriers,” said Costello.
To compound matters, the shortage comes at a time when e-commerce has come into its own and there’s an increased demand for truck drivers. The economy is booming. Shipments will be delayed, of course, and companies will have to pay higher prices to get their goods to market in time.
Costello’s best advice? Invest in technology, to get the most value out of your drivers and trucks.
There may be nothing you can do about the price you pay for gas, but, thanks to GPS technology, you can optimize your fuel consumption and make your fuel go farther and last longer. Also, thanks to such technology, you can quickly train and guide new drivers.
Inflation Rears Its Head
A third whammy to hit your Fleet budget could be inflation. Prices over the last ten years have remained stable. But that, too, may soon change. The Fed is expected to raise its rates three times in 2018.
“I don’t normally speak in hyperbole, but we’re entering some uncharted territory,” market analyst Donald Broughton said. “If there is a 10 percent increase in transportation costs, that gives you a 1 percent increase in inflation for the broader economy. That’s real.”
According to the American Trucking Association, more than 70 percent of goods consumed in the U.S. are moved by truck.
Protect your Budget
Could inflation be around the corner? What about tariffs? How will a trade war affect your budget? These are all valid questions, with answers to be determined.
So far, here’s what we know:
- Fuel prices are expected to rise in 2018 and beyond.
- America faces a massive truck driver shortage.
- Inflation is starting to tick upward, even if slightly.
Is it time to panic? No.
Implementing a smart technology solution, with the right mix of software and hardware, can help minimize the impact of these forces on your Fleet budget and remain in control.
Change happens. As the Boy Scouts like to say, “Be prepared.”