Shippers and carriers alike have been spending a great deal of time the last couple of years trying to figure out where diesel prices will go – the way fuel prices have risen who can blame them?
But the comments of Faith Goodman from the Canadian Petroleum Products Institute at last week’s 22nd annual Transportation Innovation and Cost Saving Conference, left me wondering if we’re taking the right approach. Actually, to be honest, her remarks left me wondering if we are just plain wasting our time trying to pinpoint where we think fuel pricing will be in the future.
Let me explain. Goodman was quite blunt with her message: “We are in uncharted territory,” she said. “Never before have we seen such volatility.”
The estimates on the future price of crude ranges from a low of $75 per barrel to a high of $500. When even the experts are so far apart in their predictions, what chance does the average CEO, supply chain manager or carrier have in predicting future fuel costs?
Perhaps it would be wiser to prepare our companies for several different scenarios. How would continued pricing above the current $110 per barrel affect modal choices, for example, could be the starting point. Our own annual Transportation Buying Trends Survey shows that up to 44% of supply chain professionals have made changes to their modal selections as a result of rising costs.
What if the price climbs above $200 or even $250? How would consumers react and how would that change current shopping, and therefore transportation, models?
Having several models to work with I think would be a better approach than futile attempts to pinpoint a price in a market driven by volatility and where the only certainty is uncertainty.
Comments (1)
At BTC, we have one piece of advice for our clients when it comes to higher fuel costs. "Pass them on immediately. Don't try to absorb it". In this day and age we as consumers of every product are used to inflation due to rising energy costs and we fully expect it. As you indicated, it is suicide to try to predict future trends right now.
We benchmark fuel at zero every January for some clients and at contract start date for others and then (right or wrong) we mirror the NATC average. We pass it on to our clients and assist them in passing it on to theirs.
Nobody gets to play with numbers to their advantage and nobody has to accept responsibility for that which they cannot control. Our clients also benefit from the fact that we chart the trend as it pertains to them and not some random number like 56% that has no relevance.
Posted by Steve Hogg | October 6, 2008 8:18 PM
Posted on October 6, 2008 20:18