Oil Prices Affect Shipping Costs

on April 24, 2012

In previous blogs we wrote about the rising price of oil and its impact on plastics used in packaging.  At one point, raw material suppliers were predicting plastics costs to increase by over 20% based on oil price projections.   We are happy to say that the actual cost increases were closer to 7%, significantly lower than feared.

Shipping costs are going up because fuel costs are increasing.   The cost of oil is still hovering at a little over $100.00 per barrel.    This has translated into prices for diesel and gas to be around $4.00 per gallon in most parts of the country.  The price of oil has stabilized a bit recently due partly to waning tensions over Iran and the fact that Saudi Arabia has increased its output.   America’s appetite for summer travel will have a big impact on demand.  Summer is typically a time when fuel prices go up.

Many shipping companies have fuel surcharges as part of their service, this being the only way to mitigate large variations in fuel prices. In the last 5 years, diesel fuel prices have varied from just over $2.00 per gallon to nearly $5.00 per gallon; that variation could cause a fuel cost swing of well over $800.00 in cross country hauling.

Packnet owns a small fleet of vehicles and also contracts out to local couriers for local shipping.  Our costs are affected by fuel costs as well, but we don’t plan to generate any profits from transportation.  Our goal is to cover our costs while including this in our total packaging and crating service.