If you’ve filled up your gas tank recently, you’re probably abundantly aware of how expensive fuel is right now. It’s not just car gasoline that’s affected. Fuel for all sorts of vessels has jumped in price over the last year or two.
When fuel prices rise, so do shipping prices. If you rely on shipping services in your business, you may be feeling the heat. Learning more about fuel costs and shipping will give you a better understanding of what’s going on and equip you with some strategies to help.
How Fuel Costs Raise Shipping Prices
The fuel for getting goods from place to place costs money. The more fuel costs, the more expensive it is to ship items. Whether your shipments are going by truck, rail, airplane, or ship, you can expect fuel prices to affect your bottom line.
Ocean shipping is particularly influenced by fuel costs. That’s because cargo ships use an incredible amount of fuel, and the cost of fuel typically represents at least 50% of the expense to operate a ship. One container vessel can easily go through more than 200 tons of bunker fuel each day. During a multi-week trip, that can add up.
Other forms of transportation are feeling the pinch as well. When gas prices rise, the per-mile cost of operating trucks goes up. In 2021, per-mile trucking costs reached a record high. Analyses show that at least a third of that increase was directly attributable to the increased cost of fuel.
Cargo airlines have similar troubles when fuel is expensive. In just the first few months of 2022, fuel prices had more than a $134 billion impact on this industry. Fuel prices contribute to at least 25% of the cost of air shipping.
Rail is a more fuel-efficient mode of transportation than others, but even it isn’t immune to price fluctuations. Even though trains don’t require as much fuel, rising prices can still hurt a company’s books.
How Shipping Companies Are Adjusting
While fuel prices can have an outsized influence on the cost of shipping, all hope is not lost. Shipping companies rely on a variety of strategies to mitigate the impact.
New Routes
Some shipping companies are rethinking their regular routes. It can be more affordable to send one ship to many stops than to send multiple ships on shorter trips.
Companies may even partner with one another to share routes or vessels. While the two companies are probably competitors, working together can pay off for both.
Larger Loads
The more goods that a vehicle carries, the more a route can be justified.
In times of high fuel costs, ocean shippers may be more reluctant to send half-full vessels across the ocean.
Air shippers may shift their focus away from freighters – the pandemic trend of loading empty passenger planes with cargo. Instead, they may invest in increasing their fleets of freighter planes that can carry more goods in every flight.
Fleet Maintenance
Well maintained vehicles are often more fuel efficient than their worn out counterparts.
For instance, damage to the hull of a ship can increase resistance on the vessel. Overcoming that resistance requires a greater expenditure of fuel.
By keeping a fleet in top condition, operators can hold fuel costs to a minimum.
Alternative Transportation
In response to fuel costs and shipping expenses, some companies may shift their transportation choices.
Rail transport, for instance, uses significantly less fuel per mile than truck transport. It takes longer, but in some cases, it can be a worthwhile tradeoff.
Shipping companies may find it beneficial to move more of their containers by rail instead of truck. Rail and truck may both win out over air transport, which can be the most costly means of moving goods from place to place.
New or Updated Vehicles
As mentioned earlier, some cargo airlines may expand their fleet of freighters. The more large planes they have, the more goods they can carry on each flight.
Other industries, too, may invest in fuel efficient vehicles or upgrade the ones they already have. Cargo ships that have exhaust gas scrubbers can use cheaper fuel than other ships without that feature. That can lead to thousands of dollars in savings every day.
Shipping companies with 10 or 15 year old fleets may be paying quite a bit more in fuel costs than necessary. Older vehicles are less fuel efficient and less aerodynamic than newer ones. Purchasing new trucks is an investment, but it can pay off in the long run.
Customer Price Increases
Unfortunately, to maintain profitability, shippers often have to pass the increased costs on to their customers. They may do this by setting new rates or implementing fuel surcharges. Either way, you’re likely to notice an increase in your shipping bills.
How You Can Offset Rising Shipping Costs
If your business relies on shipping services, then you probably hope that your shipping companies are doing as much as possible to reduce their costs — without passing them on to you.
Of course, there’s probably a bit of wishful thinking there. Even when your shippers are doing what they can to pinch pennies, you’re still likely to see some higher bills.
You can’t force them to change their prices, but you also don’t have to settle for paying more and more and more. To lower your bills, enlist the help of a transportation post audit company.
Trans Audit specializes in helping clients save money on cargo transportation whenever possible. Our available services include transportation post audit services, cost optimization, and cost reduction. Whether you rely on air, rail, truck, or ocean shipping, we can help you recover overbillings and overpayments.
To take the first step — even in a world of high fuel prices — reach out to Trans Audit to request a demo.
