Crude Oil Price Increase Leads to More Expensive Diesel Fuel

crude oil

The commercial trucking industry has faced many hurdles over the past two years. In an industry filled with myriad logistical, liability, and operational risks, fuel pricing is one that has the potential to upend business operations. Latent demand for crude oil as world economies reemerge from their pandemic lockdowns has caused oil prices to climb; a side effect for commercial transportation firms is the corresponding rise in diesel fuel costs. While trucking insurance protects against many expected and unforeseen risks, it is critical that fleet managers understand the factors leading to high fuel costs. This can influence risk management approaches; armed with knowledge, managers can ensure uninterrupted operations, allowing crucial goods to be transported with efficiency and cost-effectiveness.

Crude Oil Pricing Pre- and Post-Pandemic

Before the coronavirus pandemic wreaked havoc on world economies, crude oil pricing hovered near $37 a barrel. As economic conditions improved and COVID restrictions were relaxed, oil prices began a slow but steady climb. By March 2021, the price per barrel is nearly $60. Although this price is substantially lower than industry highs experienced in 2014, when crude prices exceeded $100 a barrel, it represents a significant increase that has trucking companies feeling the pinch.

Diesel Costs Rising

American trucking interests experience some of the lowest fuel pricing in the industrialized world. As recently as 2019, fuel costs in the United States were about 39 cents per mile. That number has only increased as crude oil – the foundation of all petroleum products – has become more costly. Over the past year, diesel prices have jumped almost 22 cents per gallon, or an average price of about $3.07 per gallon by March 2021. Because fuel expenses represent the second-largest expense of transportation companies, even slight increases in fuel costs impact operations. As a risk management approach that supplements trucking insurance, keeping costs under control can help trucking companies overcome economic downturns. It is imperative that trucking operations maximize their routes and loading to make the most of high diesel prices.

Factors Leading to Fuel Price Increases

What has caused oil and fuel pricing to climb? There are several important factors, each contributing to rising costs:

  • Shifting expectations of economic growth.
  • Organization of Petroleum Exporting Countries (OPEC) placing a cap on worldwide oil production.
  • Reduced consumption of fuel products.
  • Relatively mild winter weather, reducing demand for fuel heating supplies.
  • Supply chain interruptions due to COVID and related economic factors.

Certain oil-producing countries like Russia and Saudi Arabia have slashed production due to reduced demands. While there is no current oil or fuel shortage, declines in production have far-reaching effects, particularly in crude oil pricing. Domestic production of crude dropped during the pandemic; oil output in the U.S. was down almost three million barrels a day from pre-pandemic figures in 2020.

Recovery will take time. Transportation industry analysts note that unexpected winter weather damaged some refinery equipment in the southern states, causing delays in returning to operational efficiency. For now, trucking insurance stands as the foundation of risk management, helping trucking companies overcome business interruptions and their related liabilities. By adding cost-cutting measures, this can help to keep cargo flowing on American roadways.

About Western Truck Insurance Services

Western Truck Insurance Services is a commercial truck insurance agency with roots dating back to 1954. We have evolved into a highly respected, professionally managed, truck and transportation insurance brokerage. The hallmark of our organization is our desire to provide unparalleled service. We go way beyond what you expect to receive from an insurance brokerage. Equipped with state of the art automation, Western Truck Insurance can provide you with lightning fast truck insurance quotes, customer service, Insurance certificates, and coverage changes. Contact us today at (800) 937-8785 to learn more!