Soaring fuel costs could put a strain on the shipping industry this Christmas, expert warns

Comments by Charles Haverfield, CEO, US Packaging & Wrapping

“The cost of oil in the US is now close to $100 per barrel after a 10-month high, nearing the highest level ever for this time of year when prices would typically fall.

“The rise in fuel inflation has been due to several factors. Political tensions in Saudi Arabia and Russia have prompted the countries to respond with aggressive oil supply cuts. Unusually high temperatures this summer have also reduced production capacity at refineries, while in Libya, devastating floods prevented oil from being exported to global markets.

“The increase in fuel prices is not only being felt by consumers but also by the already over-burdened shipping industry, which can expect to experience higher operational and transportation costs.

And with seasonal freight demand only set to increase in the run up to the busy Christmas period, these additional surcharges could have a detrimental impact on the freight industry at both a national and global scale should escalating fuel costs continue their trajectory.

“If fuel costs rise dramatically and suddenly, it can disrupt supply chains, leading to delivery delays. This can have ripple effects throughout the economy, impacting industries that rely on just-in-time delivery.

“Businesses may also look to pass these increased fuel costs down the supply chain by increasing shipping rates. With consumers already feeling the pinch of high inflation rates, higher prices for goods and services for consumers and suppliers could harm a brand’s reputation and damage long-term customer relationships.

“But it’s not just shipping costs that are expected to increase; rising petroleum costs also impact the cost of packaging. Many packaging materials, such as plastics and some types of paper, are derived from petroleum-based products. When fuel prices rise, the cost of producing these materials increases as well, driving up the overall cost of packaging production.

“However, the volatile state of crude does highlight the growing need for the shipping industry to move to more sustainable alternatives. For companies that have already invested in more green modes of transport, the sting of rising fuel costs may not be felt as keenly.

“Amazon, for example, has been introducing low-carbon electrofuels to its trucking fleet this year. The fossil-based fuel alternative is created with carbon waste and renewable power as the brand moves to decarbonize transportation across its business.

“For the rest of the US shipping industry, which still heavily relies on traditional fossil fuels, increasing fuel costs may force more freight companies to invest in more sustainable, alternative fuels and technology to power the national fleet.

“But for small and independent trucking companies, which make up a significant portion of the industry, this may not be an immediately viable investment, particularly during periods of high inflation rates and steeper operating costs. They may struggle to absorb the increased costs, potentially leading to business closures or consolidations.”

This article does not necessarily reflect the opinion of the AJOT editorial board or Fleur de lis Publishing, Inc. and its owners.