This summer came with more than just rain and sunshine. We experienced diesel costs reach new highs across the United States, straining the operations of trucking companies and wreaking havoc on the transportation industry. The price of fuel that powers heavy-duty trucks used for shipping increased by nearly $1.50 a gallon in just two months. According to the U.S. Energy Information Administration, the national average price of diesel climbed to $5.62 a gallon, reaching over $6 a gallon in some parts of the country.
Rising fuel prices have a much more significant impact on the economy than people realize. Fuel price increases trickle down to the international transportation industry and affect freight fees. In fact, shipping costs within the U.S. have risen 15% to 20% from last year. In this blog, we will discuss the effects of rising fuel prices on brokerage freight fees and the transportation industry as a whole so you can start preparing for a successful 2023.
How Freight Fees Impact The Economy
Shipping costs have been found to be an important factor in inflation around the world. When freight fees double, inflation tends to increase by about 0.7%. Moreover, the effects are persistent, usually peaking after a year and lasting up to 18 months. For example, when fuel prices increase dramatically, drivers feel it at the pump within weeks. However, with the shipping and freight rate increases, the impact on prices at the cash register builds up gradually. This makes freight fees less of a buzz in the news, but it has a significant impact on the daily lives of citizens.
Impacts On The Trucking Industry
Truck drivers and business owners of trucking companies are well aware of the rise in diesel prices. Many trucking companies have had to reconsider projects or halt their operations altogether. According to the American Trucking Associations, U.S. commercial vehicles, including big rigs, burn about 36.5 billion gallons of diesel annually, exemplifying how these rising prices affect the industry.
Generally, trucking companies tend to cover rising diesel prices through fuel surcharges. These surcharges are built into contracts with freight brokers. However, there are thousands of smaller fleets and independent truck owners that make up the bulk of the industry, and they have a difficult time passing along the added expenses. Customers are trying to get everything back to pre-Covid rates, but these fuel prices aren’t allowing them to. The demand for freight and shipping is heavily outweighing trucker availability due to high fuel costs.
Outlook For The Next Year
With the state of fuel prices, high demand, and logistical challenges, trucking companies can expect a run-up in brokerage fees this year. On top of this, labor shortages haven’t made it any easier for business owners. One way to combat today’s tight trucking capacity and rising brokerage fees is by taking part in contractual agreements with a long-term supplier to lock down capacity for an extended period of time. Without being able to control prices at the pump, trucking companies must find creative alternatives to help reduce expenses.
Concerned About Your Fleet? Forerunner Insurance Is Here For You
Global shipping costs and climbing diesel prices have had a significant impact on the transportation industry. This has created a headache for trucking companies all across the country. With all of these factors at play, the last thing you need to be worried about is getting reliable insurance coverage.
Luckily for you, Forerunner Insurance is here to alleviate the stress from rising fuel prices. Our team of experts in the industry is here to provide you with affordable truckers coverage. No matter how big or small your operations are, we can help take care of all your insurance needs. For more information on our services, please contact us today.