The Impact of Oil Prices on the Freight Industry

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Instability in the Middle East and threats to geo political harmony from Iran are combining to hike up oil prices around the world. This is having an impact at all levels from big business to consumers; and the freight industry in particular is under strain as a result.

In the UK petrol prices are reaching record highs which is affecting the cost of road freight transportation. However, it is not just road freight which is affected by increasing petrol prices. Air freight is also under strain.

This is illustrated by the fact that Boeing lowered its annual growth rate predication last week because of the effect that high oil prices were having on its business. It dropped 0.1% off its 20 year forecast as a result of the high and growing cost of oil.

This does not mean that the entire air freight industry will fall off though. The market is still expected to grow at a considerable rate each year. Of course this fact is of real concern to campaigners who are keen to see a reduction in air traffic owing to the damage it does to the environment.

In some ways these campaigners are beneficiaries of the high oil price problem. After all, if prices continue to rise steeply and concern over the stability of the Middle East remains strong, companies are going to have to invest more heavily in alternative fuel sources.

It may be that in a certain number of years the freight industry will be transformed beyond all recognition. Road freight may be dominated by hybrid trucks and lorries and air freight may even be powered by a more environmentally friendly type of fuel.

In the meantime however, freight forwarding companies are watching the rising cost of oil carefully and building these prices into new industry forecasts. In this way they are not dissimilar to consumers who are also watching and worrying about the growing cost of petrol at the pumps and having to factor these new prices into their monthly budgets.

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