Diesel fuel prices will remain high, but—barring any major, unexpected disruptions in the crude oil market—dramatic price swings are unlikely for the time being.
In 1999, the average U.S. price of diesel fuel was about $0.50 per gallon wholesale and about $1.10 retail. So far in 2012, average prices have been about $3.00 per gallon wholesale and $4.00 retail. The biggest single factor in this increase has been the underlying price of crude oil. Increases in the price of crude have accounted for more than 80 percent of the rise in diesel prices.
Indeed, as Figure 1 shows, the correlation between diesel prices and crude prices over the past 20 years has been remarkable, reinforcing the expectation that suppliers will eventually pass on all price fluctuations, both increases and decreases, to customers. In short, if you want to predict diesel and gasoline prices, you need do no more than predict where crude prices will go—which, of course, is easier said than done.
Article Figures
[Figure 1] U.S. diesel price vs. underlying crude price (in U.S. dollars) 1994 to 2012Enlarge this image
[Figure 2] Light sweet crude oil prices (historical and futures)Enlarge this image
For the foreseeable future, diesel prices will be driven more by crude price movements than by downstream dynamics such as refinery-capacity utilization or supply constraints. Still, it's helpful to briefly examine the dynamics of diesel supply and demand.
U.S. demand for diesel is expected to continue to grow moderately—about 1-percent average annual growth projected for the next 20 years. Given such slow growth, demand is unlikely to be a major factor in diesel pricing. This growth rate is slightly lower than that expected for the economy as a whole because many large industrial users and some fleet operators will convert to cheaper natural gas. The growth rate also is slightly higher than that for gasoline (for which demand is expected to be flat) because federally mandated increases in fuel economy will impact gasoline demand.
U.S. refiners will be able to handle the additional volume required to meet this moderate growth in demand. Refineries have flexibility to change the percentages of diesel and gasoline they produce. Historically, they have maximized gasoline production because of the demand mix in the United States. If demand grows more quickly for diesel than for gasoline, refiners can adjust production to some extent without making significant additional investments.
Additionally, in 2011, for the first time in generations, the United States became a net exporter of refined petroleum products. In short, as domestic diesel demand grows, there will be sufficient domestic supply capacity to meet it.
Where are prices headed?
Enough diesel fuel may be available, but the question on everyone's mind, of course, is: At what price?
The New York Mercantile Exchange (NYMEX) West Texas Intermediate (WTI) futures strip is a month-by-month measure of the expected value of futures contracts on crude oil. Because these contracts are publicly traded, they represent the market consensus on what will happen to crude prices in the coming years.
As Figure 2 shows, the market does not currently expect dramatic swings in the price of crude, and therefore, the price of diesel. (As noted earlier, we can expect diesel prices for the most part to move in tandem with crude prices.) Obviously, the market could be wrong. Indeed, Figure 2 would have looked similar in 2000 or 2005. It's possible that the market may now be failing to account for unforeseen runaway demand in previously low-profile areas, economic crises, political events in the Middle East, or other surprises. When such unexpected events disrupt oil prices, they can potentially cause big disruptions in the price that carriers pay for diesel and in key forecasting variables, such as consumer incomes or inflation rates. That's why it's a good idea to have a supply chain strategy that can succeed even in the face of the unpredictable.
Assuming the forward market is correct, and there will be no dramatic price swings for crude oil, supply chain managers can expect a continuation of the trends of the last three to four years. For example, today's high diesel prices are making long-haul transportation of "heavier" products too expensive, so we should see continued pressure on companies to move production of low value-to-weight products closer to demand centers. Although U.S. natural gas will probably not stay as profoundly cheap as it is right now, it will continue to be cost-competitive with diesel in situations where it is a genuine substitute.
Finally, don't look for any price breaks; the recent significant increase in diesel prices is likely here to stay. Therefore, it's very unlikely that we'll see any significant, sustained reductions in trucking, rail, or ocean freight costs in the future.
The venture-backed fleet telematics technology provider Platform Science will acquire a suite of “global transportation telematics business units” from supply chain technology provider Trimble Inc., the firms said Sunday.
Trimble's other core transportation business units — Enterprise, Maps, Vusion and Transporeon — are not included in the proposed transaction and will remain part of Trimble's Transportation & Logistics segment, with a continued focus on priority growth areas following completion of the proposed transaction.
Terms of the deal were not disclosed but as part of this agreement, Colorado-based Trimble will become a shareholder in Platform Science's expanded business. Specifically, Trimble will have a 32.5% stake in the newly expanded global Platform Science business and will receive a Platform Science board seat. The company joins C.R. England, Cummins, Daimler Truck, PACCAR, Prologis, RyderVentures, and Schneider as a key strategic investor in Platform Science along with financial investors 8VC, Activant Capital, BDT & MSD Partners, Softbank, and NewRoad Capital Partners.
According to San Diego-based Platform Science, the proposed transaction aims to enhance driver experience, fleet safety, efficiency, and compliance by combining two cutting-edge in-cab commercial vehicle ecosystems, which will give customers access to more applications and offerings.
From Trimble customers’ point of view, they will continue to enjoy the benefits of their Trimble solutions, with the added flexibility of the Virtual Vehicle platform from Platform Science. That means Virtual Vehicle-enabled fleets will receive access to the Virtual Vehicle Marketplace, offering hundreds of new and expanded applications, software, and solution providers focused on innovating and improving drivers' quality of life and fleet performance.
Meanwhile, Platform Science customers will enjoy the added choice of Trimble's remaining portfolio of transportation solutions which will be available on the Virtual Vehicle platform, the partners said.
"We believe combining our global transportation telematics portfolio with Platform Science's will further advance fleet mobility and provide our customers with a broader portfolio of solutions to solve industry problems," Rob Painter, president and CEO of Trimble, said in a release. "Increased collaboration between the new Platform Science business and Trimble's remaining transportation businesses will enhance our ability to provide positive outcomes for our global customers of commercial mapping, transportation management, freight procurement, and visibility solutions. This deal will result in significant synergies along with tremendous opportunities for employees to continue to grow in a more-competitive business."
The acquisition comes just five months after Platform Science raised $125 million in growth capital from some of the biggest names in freight trucking, saying the money would help accelerate innovation in the commercial transportation sector.
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
Economic activity in the logistics industry expanded in August, though growth slowed slightly from July, according to the most recent Logistics Manager’s Index report (LMI), released this week.
The August LMI registered 56.4, down from July’s reading of 56.6 but consistent with readings over the past four months. The August reading represents nine straight months of growth across the logistics industry.
The LMI is a monthly gauge of economic activity across warehousing, transportation, and logistics markets. An LMI above 50 indicates expansion, and a reading below 50 indicates contraction.
Inventory levels saw a marked change in August, increasing more than six points compared to July and breaking a three-month streak of contraction. The LMI researchers said this suggests that after running inventories down, companies are now building them back up in anticipation of fourth-quarter demand. It also represents a return to more typical growth patterns following the accelerated demand for logistics services during the Covid-19 pandemic and the lows of the recent freight recession.
“This suggests a return to traditional patterns of seasonality that we have not seen since pre-COVID,” the researchers wrote in the monthly LMI report, published Tuesday, adding that the buildup is somewhat tempered by increases in warehousing capacity and transportation capacity.
The LMI report is based on a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
That hiring surge marks a significant jump in relation to the company’s nearly 17,000 current employees across North America, adding 21% more workers.
That increase is necessary because U.S. holiday sales in 2023 increased 3.9% year-over-year as consumer spending grew even amidst uncertain economic times and trends like inflation and consumer price sensitivity. Looking at the coming peak, a similar pattern is projected for this year, with shoppers forecasted to drive a 4.8% increase in holiday retail sales for 2024, Geodis said, citing data from Emarketer.
To attract the extra workforce, Geodis says it will offer competitive wages, peak premium pay incentives, peak and referral bonuses, an expedited payment option, and flexible schedules. And it’s using an AI-powered chatbot named Sophie to serve as a virtual recruiting assistant.
“We acknowledge the immense responsibility we have to our customers to deliver exceptional service every day, and this is especially true during peak season,” Anthony Jordan, GEODIS in Americas Executive Vice President and Chief Operating Officer, said in a release. “Because peak season is the most business-critical sales period of the year for many of our retail clients, expanding our workforce is vital to ensure we have a flexible, dynamic team that can handle anticipated surges in demand.”