Rising Price of Oil: Effects on Daily Purchases and Transportation

Oil prices are going up in 2012! If you are in the trucking industry or just a consumer, when oil prices go up … YOU are affected. Oil prices not only effect the price of gasoline that we put in our car every day or diesel in a truck (which is more expensive) but also the cost of our food, packaging of products and many other items that we use daily. Remember, the cost of a barrel of crude oil is based on what speculators think will happen to the production and delivery of the barrels of oil around the world. Recently Iran made a statement that they will close the Strait of Hormuz, which is a major waterway for theStrait of Hormuz, Iran transportation of oil from the Middle East. The reason for the statement is not important pertaining to this blog, but the impact to the price of oil would be huge. The NY Times reported that if the Strait of Hormuz was closed, the price of oil could rise as much as 50% or more within days (which we are already beginning to experience).

Today the average cost per gallon of gas is $3.30 and for diesel is $3.78 (eia). Just sit back and imagine if the cost of these two items doubled within 2 days. Let’s do some quick math, to personally fill my car the cost would go from $60 to $118. To fill a truck that can carry 400 gallons of diesel would go from $1,512 to $3,024. For shippers, the fuel cost that you would pay for a shipment from Los Angeles, CA to Boston, MA would go from an estimated $1,581 to $3,849 just for the cost of fuel. That does not count the line haul cost. If the cost of transportation for our products goes up, so do the costs at stores where we buy our goods. Food, paper towels, diapers, apparel, paper for the copier, etc… will go up.

So, if you ever wonder why oil prices are such a big issue in this country or why the USA spends so much time in the Middle East, just look at the impact it has on your personal budget and transportation services. Look at the impact on one of your shipments if oil prices should double.

-Chris Reeves, Director of Specialized Services
Twitter: @BGTruckload

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