Plunging Fuel Prices Buoy Shipping and Trucking Firms

A sharp drop in the price of oil is lowering fuel costs for transportation providers, a welcome development

The Wall Street Journal

Dec. 18, 2015—Plunging fuel prices are emerging as a rare bright spot for logistics companies, which have struggled recently with weak demand.

A gallon of diesel costs $2.34 in the U.S., a six-year low and down about 30 percent from the same time last year, according to the U.S. Energy Information Administration. The price of bunker fuel, which powers engines on container ships, is down about half from a year ago, according to Bunker World.

Transportation firms generally pass along much of their fuel savings to shippers. But the steep decline in energy costs is providing relief at a time when meager global economic growth is holding down freight volumes. Many trucking companies, airlines and shipping lines have been forced to cut their prices to hold onto customers, and lower fuel prices help soften that blow, analysts say.

“The ongoing decline in the cost of fuel has effectively lowered the cost of operations for all modes of transport, which allows marginal operators to continue where they would have otherwise failed, and allowing better operators to thrive,” says Donald Broughton, an analyst with Avondale Partners.

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