Transportation Essay - Module 6.docx - Fuel Price Impact on Transportation October 4 2017 Fuel Price Impact on Transportation Fuel price fluctuations

Transportation Essay - Module 6.docx - Fuel Price Impact on...

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Fuel Price Impact on Transportation October 4, 2017
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Fuel Price Impact on Transportation Fuel price fluctuations affect every aspect of the transportation industry. Transportation carriers must adhere to ever changing variations in the form of cost of labor and fuel prices to maintain a steady flow of revenue to stay in operation. Although not all modes are affected in the same way, as there are many obstacles each must overcome which are unique to their industry, and sometimes at the expense of one another. “Market share changes generally occur at the expense of one carrier over another” [Joh16] . This may make it difficult for each carrier to maintain a steady flow of income when there are fuel price fluctuations in the market, they must overcome these obstacles or forfeit contracts to another company or mode of transportation. To stay relevant, they must come up with solutions to problems that are not easily forecastable. This makes it difficult to predict future revenue and allocate resources to labor and fuel without having to pass along the expenses to the customers. “Motor carriers provide the bridge between pickup and delivery point and the facilities of other modes; that is, the motor carrier is referred to as the universal coordinator” [Joh16] . Motor carriers cost structures have been affected by fuel and labor in similar, but different ways. Labor cost include wage plus fringe benefits. Fringe benefits include a wide array of benefits to the driver including health insurance to meal reimbursements. “The cost of labor impact of motor carrier operations varies since drivers account for 20% of the total costs per vehicle mile. Labor costs usually absorb about 55% of a carrier’s revenue dollar” [Joh16] . When taken into consideration that long haul drivers are paid by mileage, the company is only making a small
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Fuel Price Impact on Transportation percentage once labor is paid. Trucking companies have combated this by hiring non-union drivers and the utilization of large capacity equipment [Joh16] .
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