Transportation analyst says carriers have benefited from dramatic drop in fuel prices in the second half of 2014, but need to prepare for inevitable rise.
The transportation analyst FTR Associates said that falling diesel prices and the reversal of an onerous national hours of service regulation have aided the trucking industry.
FTR’s Trucking Conditions Index rose to 8.98 in November, though the analyst cautioned that it reflects temporary relief caused by the dramatic drop in fuel prices.
“Diesel fuel prices have dropped nearly 20 percent over the last year, and nearly all of that drop has occurred over the last six months,” said Jonathan Starks, FTR’s director of transportation analysis. “The drop in diesel prices is a dramatic change in the operating environment for carriers after a four-year span in which fuel prices were nearly stagnant. This drop is the single biggest contributor to November’s improvement in the TCI and is expected to continue to push the TCI higher when the December results are in. Conversely, carriers will take a hit to margins when fuel costs inevitably rise. It remains to be seen if the drop in fuel costs will benefit rate negotiations in early 2015.”
FTR said the benefits to carriers will last as long as prices are moving down, while strong freight volumes from a good Christmas shopping season also helped. FTR said it expects the index to remain in a “normal” range for a tight trucking market throughout 2015, with readings in the 8-9 point range.
Trucking capacity will increase somewhat in 2015 as truck utilization falls under the influence of the 34-hour restart provision suspension.
“After a year that started with severe weather, which kept truck capacity limited until summer, December brought welcome relief as the congressional budget bill removed one of the restrictions keeping driver productivity down,” Starks said. “Finally, an economic recovery that couldn’t seem to gain any traction rebounded in the second quarter and then accelerated in the third quarter, hitting 5 percent in Q3 – a level not achieved since 2003, and the strongest two quarters of growth this recovery.”
Details of the November TCI are found in the January issue of FTR’s Trucking Update, which was released Dec. 23, 2014.
FTR: Fuel prices and regulation suspension helping trucking industry
