An Electio report into oil prices examines the implications of recent fluctuations on the retail and logistics industry. The 2016 downward trajectory of oil prices has failed to make a notable recovery post-Brexit, falling to a three month low this week.
This has made it increasingly hard for the industry to manage its fuel costs. The knock on effect is significant given that vehicle fuel constitutes 20-30% of the cost of making a delivery.
In the immediate aftermath of Brexit investors moved to safe havens such as gold, which affected commodity markets globally. While the markets look to be making a slight recovery there are still uncertain times ahead for oil. Pre-Brexit, leading economists were making negative predictions for oil for a number of reasons including a weakening Chinese economy, fracking and the natural end to a 30 year commodity cycle.
“Fluctuations mean uncertainty for retailers and carriers”, says Paul Hill, director of client operations at Electio. “When a parcel is out for delivery with a carrier it spends 85% of the time in transit. That’s a lot of time on the road, in the air or at sea burning up fuel. So how much that fuel costs has a big impact on the overall cost of the delivery.”
The report, entitled Drilling Down: Oil prices and the economy examines what price changes mean across transportation routes including freight, air and sea and has been designed to help retailers manage their fuel cost calculators better during turbulent times and beyond. By being able to predict peak more accurately, for example, and plan volume capacity better, retailers can avoid being hit by hefty surcharges from carriers should oil prices continue to rise and fall.
“We’re all living through a period of flux following the EU referendum, but consumers continue to demand their goods and the industry must continue to deliver” continues Hill. “Understanding your fuel cost calculator and negotiating the best possible deal with your carriers is one way to mitigate some of these unknowns but it also stands retailers in good stead for when prices have stabilised.”
Drilling Down: Oil price and the economy is available to download at www.electiodelivers.com