Are you prepared to discuss rates with your carrier? As outlined below, carriers will be utilizing the rising fuel costs as leverage to increase your rates. As a client of Ship Watchers you not only will realize savings from our auditing solutions to minimize the affect of rising fuel costs, but also have the option to work with industry leaders on negotiating your carrier contracts for best possible pricing.
March 11, 2014
Following its first decline in six weeks, diesel prices resumed on a growth path, with its sixth increase in the last seven weeks, according to the Department of Energy’s Energy Information Administration (EIA).
With a $0.5 cent gain, the average price per gallon headed up to $4.021, marking the highest average price per gallon since checking in at $4.047 the week of March 18, 2013. Over the past seven weeks, including last week’s decline, the average price per gallon has gone up a cumulative 14.0 cents.
And the average price per gallon has now been over the $4 mark for the third straight week, falling well short of an eight-week stretch from February 4, 2013 to March 25, 2013, when prices were above the $4 mark.
On an annual basis, even with recent weekly gains, the average price per gallon of diesel is down 6.7 cents, and on a year-to-date basis, it is up 11.1 cents (since the week of January 6).
As prices continue to rise, adjusting budgets is only part of the solution when it comes to dealing—and living—with fuel price fluctuation, according to shippers.
In some cases they look for hedge diesel prices when it is applicable, shippers have told LM. This involves committing to a certain price on fuel at which pay to a certain rate at which point it is frozen at that rate for the shipper. And it also requires shippers to be focused on keeping their drivers on the road as much they can and being profitable and not in detention.
As previously reported by LM, other steps being taken by shippers to combat high fuel prices include things like focusing more on utilization and efficiency by doing things like driving empty miles out of transportation networks.
And the fact that if prices rise on average has a direct effect on fuel surcharges paid by shippers is always top of mind for them.
“Continued increases in fuel surcharge will drive shippers ultimate transportation spend to all time highs,” a shipper said in an interview. “Carriers will do all they can to pass any excess cost back to the shipper, smaller carriers are definitely feeling the pain associated with the fuel increase and are demanding more for their services. When it becomes time to negotiate rates, carriers will be talking a lot about the cost of fuel and using it as a leverage point for general rate and line haul increases. Shippers must be acutely aware of what percentage of their invoice cost is actual fuel surcharge.”
Shared by Ship Watchers - Logistics Auditing Solutions
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