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How Are Rising Fuel Prices Impacting the Supply Chain?

Several factors are working against the supply chain right now, but the cost of fuel continues to have a considerable impact. While conversations around fuel prices aren’t new, in 2022 the price of gas in the US broke previous records, coming in at an average of $5 per gallon. Thankfully, we’ve felt relief from paying the record-high prices of 2022, but over the past few weeks, prices have begun climbing once again

Why are gas prices rising?

There are countless potential reasons for rising gas prices, but the recent price hikes are primarily due to current weather conditions and the war in Ukraine. Prices initially jumped after the war in Ukraine prompted a global oil crisis, resulting in the $5 high seen in June 2022. More recently, unexpected cold snaps caused unforeseen closures of refineries in areas like Texas and the Gulf Coast.

What does the rising cost of fuel mean for the supply chain?

Understanding how high gas prices affect logistics can help you make a plan to minimize the pain your company feels from the fallout. The cost of fuel primarily impacts the supply chain in two areas:

1. Increased operational and product costs

Rising gas prices impact both businesses and consumers in a domino effect. Paying more at the pump leads to higher operational costs for businesses, and higher operating costs lead to higher product costs for consumers. A rise in costs across the board impacts just about every industry – if it has to be shipped, the price is likely to rise with the cost of fuel.

2. Carrier profitability

Profitability is threatened when companies pay more for anything required to keep their business up and running, and steep fuel costs are no exception. Rising gas prices impact trucking margins significantly in terms of post-delivery miles. After dropping off a load and putting in the miles required to reach their next destination with no cargo, carrier companies are forced to pay drivers higher-than-usual rates for those “deadhead” miles. 

How do you plan for high gas prices?

The most effective way to deal with high gas prices in the supply chain industry is to be prepared. Don’t let a rise in fuel cost catch you by surprise and create chaos; utilize fuel forecasting strategies to get ahead of price changes and plan accordingly. During times of economic uncertainty, prioritize making decisions based on real-time data.

You have enough things to worry about when it comes to keeping your business up and running on a daily basis; navigating the rising fuel costs shouldn’t be one of them. Contact AmDistro today to learn how we can help you plan for high gas prices in 2023.