This Editorial appears in the Aug. 30 print edition of Transport Topics. Click here to subscribe today. About the only silver lining that seems to be coming from the obvious slowdown of the U.S. economy is that it’s taking pressure off domestic fuel prices, in part by encouraging commodities speculators to find other places to ply their trade.
Retail diesel and gasoline prices have declined for two straight weeks, and crude oil prices dipped to $72 a barrel last week, the lowest level since early July (see story, p. 1).
The diesel average, after declining 3.4 cents over the past two weeks, is $2.957 a gallon, which is still almost 29 cents higher than it was one year ago.
The decline in the gasoline average has been more precipitous. After dropping 7.9 cents over the past two weeks, it stands at $2.704 a gallon, just 7.6 cents higher than a year ago.
Market analysts report that hedge-fund traders have mostly vacated the petrol markets, concerned that reports of slowing economic growth are diminishing the prospects that fuel prices will rise in the short term.
The exit of the speculators is good news for trucking, not just because high levels of commodities trading tends to push prices higher but also because speculators tend to bring more volatility to markets, resulting in sharper price swings.
“Earlier this year, we said the only factor unaccounted for that was keeping oil prices high was extreme speculation by large institutional investors,” said Randy Mullett of Con-way Inc.
And the worst damage to fleets generally comes from sharp price swings, even more than simply rising prices.
“Fuel will always be a concern for trucking companies because it’s a major expense, but it’s the wildly swinging prices that put us in a tough position with the users of our services,” Mullett said.
Surely, a slowdown in the economic recovery is not something that trucking is rooting for. But the cooling down of fuel prices at least helps stabilize the market, which is good for fleets — and for shippers.
And many carriers obviously are preparing for growth that most analysts still are predicting will take shape later in the year and into 2011, based on the gains we have reported in truck and trailer orders and sales.
So, let’s enjoy this respite in fuel-price volatility because when business growth increases, we no doubt will be facing the return of the commodity speculators.
