Low oil prices can translate into savings at the gas pump for goods transportation, driving down total landed costs. But when it comes shipping goods by transport truck, low oil prices are a double-edged sword.
There are multiple factors to consider in calculating shipping costs and how they impact total landed cost.
Low oil means cost-savings for shippers
While low oil can lead to lower fuel costs, which means savings for shippers, the other side of the coin means diminished buying power for those impacted by economic-related industry cutbacks.
“There’s some customer savings with a lower price of fuel; however, the cost of diesel fuel has not seen the same reduction in price at the pump,” explains Lorraine Card, executive director of the Alberta Motor Transport Association (AMATA).
Aside from fluctuating fuel costs, a more significant factor that influences total landed cost as it relates to transport is labour. And one of the biggest issues facing the industry at this moment is a shortage of truck divers.
Economic cutbacks could aid efforts to recruit truck drivers
Photo credit: Cliff Cooper Creative Commons
The business impacts of low oil prices may yield some positives for the trucking industry.
The AMTA is working to lure people into the industry and lobbying for minimum mandatory training for drivers. It’s expected those efforts will be boosted the slowdown in the oil sector as drivers return to the transportation sector in search of employment.
That, notes Card and Bell, will be a boon to business as it facilitates the supply chain goods flow. Bell says Calgary’s evolution as an inland port, as well Edmonton, will assist in further fuelling the transportation sector.
With the cities as transportation hubs, businesses benefit, big-time. “If you’ve got it, a truck brought it,” Bell says.
Low Canadian dollar benefits shippers
Photo credit: Bgilliard Creative Commons
Bell says the low Canadian dollar compared to the U.S. dollar also assists shippers as it creates a greater market for shipping to the United States.
“There’s probably a lot more of the manufactured items being shipped to the United States,” he says. “That’s going to help out the carriers.”
Reg Johnston, of Calgary-based RJ T&L Consulting Ltd. notes the impact of low oil has left many companies happy as diesel and other fuel costs are primary product transportation cost contributors. For exporters, it's good news if fuel costs decrease and all other factors remain the same.
For importers, though, that demand might not stay true with diesel prices going down, he adds.
Coupled with low oil prices, Johnston says a low Canadian dollar is a good thing for central Canada and could lead manufacturing increases and greater goods flow.
Listen to the Square One Supply Chain Podcast to learn more about the impacts of low oil prices and canadian dollar on the supply chain sector: