FTR reports positive impact of diesel dropping

Jan. 12, 2015

The FTR Trucking Conditions Index (TCI) for November scored a reading of 8.98, which the research firm said “reflects temporary relief as fuel prices drop dramatically. The benefits will last as long as prices are moving down. Strong freight volumes from a good Christmas shopping season are also helping.”

FTR said it expects the index to remain in “a 'normal' range for a tight trucking market throughout 2015, with readings in the 8-9 point range.”  The firm is also forecasting that trucking capacity will “increase somewhat in 2015 as truck utilization falls under the influence of the 34-hour restart provision suspension.”

"With a new year comes new issues to deal with, but the old ones haven't gone away,” commented Jonathan Starks, FTR’s director of Transportation Analysis. “Or have they? Diesel fuel prices have dropped nearly 20% over the last year, and nearly all of that drop has occurred over the last six months. 

“After a year that started with severe weather, which kept truck capacity limited until summer, December brought welcome relief as the congressional budget bill removed one of the restrictions keeping driver productivity down,” he continued.”

Starks also observed that an economic recovery that “couldn't seem to gain any traction finally rebounded in the second quarter and then accelerated in the third quarter, hitting 5% in Q3- a level not achieved since 2003, and the strongest two quarters of growth this recovery.”

He added that the falloff in diesel prices is a “dramatic change in the operating environment for carriers after a four year span in which fuel prices were nearly stagnant.”

According to Starks, this price drop is the single biggest contributor to November's improvement in the TCI and is expected to continue to push the TCI higher when the December results are in. “

“Conversely,” he advised, “carriers will take a hit to margins when fuel costs inevitably rise. It remains to be seen if the drop in fuel costs will benefit rate negotiations in early 2015."

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