This month’s happenings bring us the right to the cost of fuel. September’s average cost for diesel finished at $3.38 but ended with a high mark of $3.40 per gallon. Midway through October the diesel cost per gallon has risen to $3.58. We are now in territory not seen since 2014 and the years preceding when fuel prices exceeded the $3.50 per gallon threshold.
In reviewing US Energy Information Administration (EIA) retail cost for diesel at the beginning of 2021 and mid-year, we have exceeded expectations. The cost of oil makes up close to 50% of the cost of a gallon of diesel fuel. According to the latest oil prices, oil settled at $85 a barrel, hitting a three-year high. Overall market assumptions reflect the easing of C-19 restrictions will continue to spur demand. Supporting the surge in demand, Reuters is reporting power generation has been moving toward fuel oil and diesel from expensive gas and coal. The forecast for oil prices is upward with the International Energy Agency expecting demand to increase by 500,000 barrels per day resulting in a shortfall of 700,000 barrels per day until January when OPEC is expected to increase production.
Truckload rates managed to stay relatively flat even in the face of rising diesel costs. September’s average cost per mile hit a high mark for 2021 coming in at $3.38 per mile. Midway through October we have seen a decline in the cost per mile to $3.35, which is good news considering the rising cost of fuel. Congestion remains a critical issue as the ports of LAX and LGB illustrate an increase of 25% to 30% in container volume year to date over 2020. Adding to shipper woes is the rail yard congestion being experienced across multiple points. Chicago continues to be a challenge with a severe chassis shortage. The challenges in Chicago are causing multi-day embargoes on receiving containers for both inland transit to Chicago and transit out of Chicago.
Illustrating deeper challenges for shippers, the Rockfarm tender reject percentage rose to 13% in October as carrier capacity continues to shrink. A secondary capacity measuring available opportunities within Rockfarm’s shipper portfolio illustrates loads available moving over the trend line to its highest point since March of this year. As companies shore up inventory levels, a .6% increase for August was reported but is still well below the 10-year running average. Since August 2020, inventory levels have risen by 7.4%. However, we still have a steep climb before inventory levels are at pre-pandemic levels.
• Long Beach – Vessel waiting time is 15 days due to high import dwell and labor shortage. On Friday, October 15th second shift, Pier A Terminal will be open for ‘Import Pickup Only’.
• Los Angeles – Vessel waiting time is 8-15 days due to yard congestion, high import dwell and labor shortage. APM Los Angeles yard utilization is at 79% of capacity.
• Oakland – Vessel waiting time is 1-2 days due to certain levels of import volume and labor shortage.
• Seattle – Vessel waiting time is 25-30 days due to high import volume and labor shortage. T18 Terminal yard
Brad’s journey into logistics began as a Marine Officer and transitioned from the LTL docks to the non-asset side within the logistics service provider arena. As a co-founder of Rockfarm, Brad drives our business development efforts and delivery of our promise. An Arizona native, Brad enjoys spending time outdoors in his home state with his wife and family.
“Our approach to the market allowed us an opportunity to push forward in 2008 and enable our mission, “lower the cost to serve” to stand as a cornerstone to our company today.”
Sanicola, L. (2021 October) Oil prices rise to three-year high on back of supply deficit forecasts. Reuters. https://www.reuters.com/business/energy/oil-prices-rise-tight-supply-setweekly-gain-more-than-2-2021-10-15/U.S. Energy Information Administration. www.eia.gov
The Port of Los Angeles.
The Port of Long Beach.
Hamburg Sud. Weekly Operational Update Week #41
U.S. Census. Manufacturing and Trade Inventories and Sales, August 2021
Cassidy, W. B. (2021 October). ODFL plans $1,000 surcharge for over-length freight. joc.com
Lopez, E. (2021 October). 7 challenges lie ahead for the Port of LA to support 24/7 supply chains.
Kapadia, S. (2021 October). ArcBest’s MoLo acquisition bolsters presence in crowded freight brokeragemarket. www.supplychaindive.com
Kassal, L. (2021 October). Diesel Stockpiles at 20-Year Low as Winter Nears. www.ttnews.com
McCrea, B. (2021 March). Logistics Management. TMS Update: Adoption Accelerates.