Middle East Unrest and Fuel Prices
This Editorial appears in the Feb. 28 print edition of Transport Topics. Click here to subscribe today.
Just as the U.S. economy seems to be growing some serious muscle, international events are threatening to intervene in what has become a period of steady business improvement.
The spreading unrest throughout the Middle East has spooked investors around the globe, sending petroleum prices skyrocketing and possibly portending a spurt in prices for a wide range of products well beyond fuel.
Crude oil prices on the New York Mercantile Exchange got as high as $101 a barrel last week, as battles in Libya escalated between protesters and the government of strongman Moammar Gadhafi. Oil prices haven’t been that high since October 2008.
The U.S. retail diesel average has now risen for 12 consecutive weeks, jumping 13% during that period to $3.573 a gallon. And gasoline isn’t far behind, having increased in 11 of the past 12 weeks to an average of $3.189, more than 53 cents a gallon higher than during the corresponding week of 2010.
While trucking has generally done a good job in getting fuel surcharges in place to protect fleets from price spurts by passing the increased costs along to shippers, the overall economy has no such protection.
Food prices are particularly sensitive to fuel-price spikes, and many manufactured products are sure to post higher price tags as a result of this upward climb.
Analysts warn that high petroleum prices could take the air out of the economic recovery, but only if the price spike continues into the $120 a barrel range, and if the higher prices continue for an extended period.
But there is little doubt that the price run-up is sending chills up many spines in trucking, just as more fleets are out buying new trucks and trailers and looking to hire drivers.
Freight tonnage in January rose by 8% over year-ago levels, a very strong showing, as American Trucking Associations’ freight index reached its highest point in three years.
But fleet executives told us that they’re worried that $4 gallon fuel — and the ramifications of that high price — could quickly dampen the recovery in freight levels.
One of the frustrating parts of this latest threat to our economy is the feeling that the United States has virtually no way of affecting events. Rather, we need to continue to work to improve fuel efficiency and to find alternative ways to power our vehicles so that we can move the goods the nation’s consumers need.
