What goes up must come down, or more to the point in the case of oil prices, what went down will inevitably go back up, probably this summer. And when diesel goes up, motor carriers and especially owner-operators will feel the pinch the most, says IHS Global Insight’s Charles Clowdis Jr.
As diesel prices rise, “motor carriers and all transport providers in the U.S. will feel the impact on their operations,” said Clowdis, managing director, transportation consulting.
“Increased prices will result in escalating fuel surcharges that will, by necessity, be passed to the shipper [and] owner-operators will also find their fuel costs rising,” said Clowdis, adding that they’re the ones who are hurt most since they can’t pass a fuel hike along because there’s nobody to pass it to.
“In the summer,” he predicted, “we’ll see a rise in gas and diesel prices when the traditional vacation season starts. I don’t want to say how much or how little; it’s starting to happen a little [now]; but I don’t think crude will hit $147 a barrel.”
“One thing that’s driving fuel prices is consumer spending,” he noted. “Consumer spending went up 1.6 percent recently. That’s something the oil companies watch: consumers are buying new clothes, eating out in restaurants. There’s pent-up consumer demand and if that rises or continues to rise it will encourage oil-producing nations to try and raise prices.”
Additionally, China and India are once again consuming great quantities of oil and, he said, “their demand could bid up the price of crude oil. That’s supply and demand.”
“I have great empathy for owner-operators,” he added. “They always take the brunt of something like this.”
He said what hurts owner-operators will hurt the economy overall. As more and more owner-operators are forced out of business those fleets that don’t have company drivers or that use owner-operators to supplement their driver pool are going to be in a very vulnerable situation.
“That takes away capacity and that takes away the drivers who could supplement the for-hire guys.”
Clowdis joked that making predictions about oil prices is a sure way to make the market do just the opposite.
Sure enough as he was talking about summer fuel increases The Associated Press reported that oil had “slumped” to $83 a barrel based on news of Goldman Sachs being charged with fraud.
Dorothy Cox of The Trucker staff may be contacted to comment at email@example.com.