Fuel Costs Climbing - President Has The Key

As fuel prices continue to increase and the memory of the summer of 2008 comes into focus for our country, let's hope the past repeats itself - or is at least given a chance.


Source: http://www.eia.doe.gov/


The per barrel oil price peaked in July of 2008, right along with the national average of diesel fuel. While we are far from the pinnacle of both, we are rapidly on course to meet them soon. The difference should be the painful memory of filling up to get to work at the expense of not eating or not paying bills.  All this while hearing daily conversations and declarations that it was a defining moment in the behaviors and policies of not just Americans, but people through-out the world.

Apocalyptic banter of a greedy President lining the pockets of his cronies filled the airways along with talk of new technologies taking over if the cost of fuel continued to increase (electric cars, wind and solar power, hydrogen powered cars... etc).

In the end it is just a memory to most.  But why? What happened? What turned the tide?

Malcom Gladwell is the author of The Tipping Point - How Little Things Can Make a Big Difference. This book defines and demonstrates the strange phenomenon of everyday struggles that change in an instant.

Driver Shortage - Is History Repeating Itself?... Again?

Last year RV transporters were pulling out of yards with a units that had already been on the transport company's lot in the range of a month or more, especially if they were headed North across the border (see March 2010 RV Business article "RV Transporters Cope with Driver Shortage" where Classic Transport reported having a 6 week backlog).

All transporter companies were in about the same shape, plus or minus a couple of days, because the manufacturers were self regulating dispatches based on which transporter was the least number of days out in addition to which ones could get a hot unit delivered first.

If that sounds familiar, one only needs to look back to May of 2007 to an RV Business article outlining the same situation, but for different reasons according to the transport companies ("RV Transport Firms Encounter Driver Shortage").  In that article, the source stems from the tidal wave of new drivers to the industry in order to move the Katrina FEMA units (you all remember those don't you - money through the nose with DOT waivers for all applicable regulations... that may be a slight exaggeration, but you remember).

After the FEMA units dried up, there was the natural decline of the industry in the second half of the year which spread the units too thin across the over-abundance of drivers leaving many with only one option - get out of the RV transport business.

In 2007 the RV transport companies realized they were in the midst of an unexpected driver shortage, but not in time to affect change.  In addition to laying some blame on the inability to support a large enough base of drivers during the slow period, there was also the aspect of fuel costs.  The manufactures were slow to respond to the rising cost of fuel which resulted in the inability of drivers to operate profitably.

What is Fueling the Fire? – Diesel Prices on the Rise

Diesel fuel is almost $0.50 per gallon higher December this year over last. That is nationally as well as by region across the country (U.S. Energy Information Administration). The first question is always, “What does that mean for you?” while the second question inevitably comes… “Why the increase?”

The answer to the first question is simple – whoever bears the cost of the changing commodity comes out on the short end of the stick. As they say, $%@# flows downhill, so the majority (but not all) of the time it is the driver or carrier as they are at the end of the food chain. There is, however, a wide range of debate over the answer to the second question of “why”.

One consistent message being reported around the world is “distribution margin increases”. This is the easiest to understand. The price goes up so the distributors can put more money in their pockets. This is in addition to the price per barrel cost increases, so now we conclude that there are multiple components to the answer (no great surprise).

The message here in the US is that the ban on drilling in the Gulf of Mexico by President Obama has weakened our domestic supply resulting in the cost per barrel