Oil Prices: Rising Oil Prices Set To Push Up Freight Rates
April 9th, 2010
Trucking industry representatives are warning freight customers to expect a rise in cartage rates this year as transport companies are forced to pass on rising operating costs. The primary culprit of higher costs is the surge in global oil prices which have reached a 12 month high. Exactly how much oil prices will rise in 2010 is difficult to predict. Pricing in global crude oil markets is being determined by China, where economic expansion is described by the International Energy Agency as “astonishing.” There is also more evidence of hoarding of crude oil and speculators have been back in the market, which has seen significant swings.
Crude oil has climbed more than 70% in the past 12 months. In kiwi dollars diesel has gained about 12% at the pump in the same period. NZL Group managing director Ken Harris is blunt in his assessment of the situation facing the industry. “Fuel and leasing trucks and the whole business environment is much more expensive to operate in now. We have no option but to increase prices.” Harris adds the transport industry has absorbed a lot of costs, including fuel, in the past two years because there has been a lot of surplus capacity. Road Transport Forum CEO Tony Friedlander predicts oil prices, broadly, will rise, as the global economy picks up and “until we see increased capacity.” Friedlander notes a lot of contracts in the transport industry have fuel-price adjustments built in. Firms need to ensure they can adjust prices with fuel costs because they are “very volatile.”
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