For businesses that rely on trucks to move their product, gas prices are always a point of concern. And while summer travel season is behind us and this time of year is typically associated with declining gas prices, this fall we are seeing gas prices start to climb due to a number of factors.
Gas prices are mainly pegged to the price of crude oil, which is on the rise primarily due to declining inventories and steady or even increasing demand. As of today, the WTI Crude price is up almost $2 per barrel over last week. Demand for gas remains high due to the strong economy. Americans are on the road, shoppers are shopping — in brick and mortar stores and online — and thriving manufacturers are shipping products.
And while US oil refinery supplies are declining only slightly, production has declined more significantly in other countries like Saudi Arabia and Venezuela. Further tightening supply, the Organization of Petroleum Exporting Countries (OPEC), Russia and other exporters have pledged to hold back production. And more investors now believe OPEC can rebalance the oil market, which has been oversupplied since oil prices fell in 2014, according to a report on OilPrice.com.
All this, plus the fact that US exports of oil have increased, means that Americans are going to pay more at the pump for the time being.
What does this mean for your company if your shipping schedule is heavy through the end of the year? It could mean you may pay more and either take a hit or need to increase prices to offset increasing transportation costs.
As with any aspect of the economy, opinions differ. Some believe prices will level out or drop again by 2018. But it may be the wisest move, in this case, to be prepared for the worst.
Photo credit: Jason Lawrence