The events unfolding in Libya are troubling on multiple fronts, especially the violence against protesters. And the unrest is now impacting the oil markets, since Libya is an important supplier of crude oil. According to an article in today’s Wall Street Journal, “the oil market is bracing to lose most or all of the country’s estimated 1.3 million barrels a day of exports. Much of that oil is of a relatively high quality, making it more difficult to quickly replace.”
Although Saudi Arabia, for example, could make up the difference, the fear is that this wave of political unrest could eventually reach other oil-producing countries in the region. This near term risk coupled with what’s happening now in Libya is putting upward pressure on oil prices, which reached a 2-year high yesterday (Brent Crude Oil Futures closed at $107.44 per barrel yesterday).
But as the chart below from WTRG Economics shows, the rise in recent days is just part of a upward trend that has been occurring for several months.
And, of course, this has led to an accelerated rise in diesel prices over the past six months.
Rising fuel prices is bad enough, but shippers also have to deal with tightening capacity, as the latest Morgan Stanley Dry Van Truckload Freight Index indicates. You can see the chart in a blog posting published yesterday by Transplace CEO Tom Sanderson, where he comments: “Morgan Stanley’s dry van truckload freight index indicates tighter than normal capacity for this time of year. The Q1 index has now risen slightly above the trucking boom years of 2004 and 2005. The index did not drop at the end of 2010 contrary to most years.”
It’s still early in the year and a lot can change over the coming months, but the early signs point to tighter truckload capacity in 2011. And don’t forget the potential impact of Hours-of-Service (HOS) and CSA 2010.
The bottom line: Take a look at what you budgeted for transportation costs this year, especially fuel surcharges. Still feel good about your budget? If not, what are you going to do about it?