30 April 2021
How are rising fuel prices affecting
The fuel markets encounter
changes and fluctuations on a regular basis, which are caused by several
factors which we examine below.
The logistics industry
is certainly no stranger to the changeable subject of fuel pricing and the
volatile nature of this sought-after commodity.
But what impact does
the inconsistent and high variability of fuel pricing have on the UK logistics
industry? We explore rising fuel prices and the affect it has on logistics.
Fuel prices and the supply chain
The supply chain has
an undeniably close relationship to the fuel industry, with the supply chain
of virtually every product and/or consumer goods being impacted by fuel. Whether
it is travelling from a supplier to a distributor then to a retailer, its cost
is likely to be directly linked to the total cost of fuel to complete its
The direct impact of
rising fuel pricing and the logistics is unquestionable, with transportation
being a significant part of a business’ logistic outlay. This share only
increases as fuel costs rise.
Fuel pricing: The current landscape
In 2016, it was
reported by the Office of National Statistics (ONS), that the cost of diesel had dropped below £1
a litre at supermarket forecourts for the first time since 2009. After continuing to decline at the end
of 2018, fuel prices began to creep back up.
Data from the
Agriculture and Horticulture Development Board (AHDB) shows that the average price of crude oil stood at
$41.47/barrel for 2020 which was a decrease of 35.2% compared with 2019. However, analysts are predicting a dramatic
fuel price hike as the price of a barrel of oil is set to soar from
$64 to $80.
Why do fuel prices fluctuate?
Oil is a highly
sought-after commodity and fluctuations in fuel price are common. These
fluctuations are caused by several contributory factors, including:
- The world
price of crude oil
- Supply and
demand around the globe
disasters, war and political unrest/instability.
Rising fuel prices: The challenges
Rising fuel prices
present a host of challenges for logistics companies:
costs typically force logistics companies to either raise prices or suffer
increase in carrier costs will eventually lead to an increase to the consumer,
which could cause customer dissatisfaction and eventual loss.
prices can create a ripple effect throughout the economy – when the costs of
key consumer goods increase, higher energy costs end up in government inflation
data, which has the potential to inform interest rates.
How can logistics companies safeguard
prices is certainly not an alien concept to the logistics industry and is a
familiar situation that supply chain companies are aware of. Many supply chains
have adopted strategies to help safeguard themselves against the impact of
rising fuel prices with a focus on reducing transportation costs:
Consolidation - By reducing carrier
numbers and consolidating supply chain needs through single sourcing, there is
scope to achieve a discounted cost. Fewer carriers mean more volume of business
and potential for a discounted package for transport services.
Making efficiencies - To help tackle the
ever-changing fuel price fluctuations, logistics companies are forced to think
of ways to constantly improve their operations and make vital efficiencies that
enhance service levels. For those that want to make fewer risks, they may
decide to lock in their fuel price risk exposure to help guarantee their budget
numbers for the year.
Nearshoring - To attempt to reduce
the length of transportation for products in the supply chain, many industries
adopt the concept of nearshoring. This involves sourcing products and raw
materials from locations that are near the end-market in an attempt to reduce
Overcome your fuel cost challenges
If you are a business
or enterprise and are looking to overcome key logistics challenges and make
business-critical efficiencies through EPOD upgrades you should consider our
PODStar solution. Amongst a wide range of business benefits, the system yields tangible results in terms
of fuel reduction and improved carbon footprint.