InterviewDiesel now top cost for road carriers

28 February 2008 20:58  [Source: ICIS news]

By Al Greenwood

HOUSTON (ICIS news)--Fuel has overtaken labour and equipment as the top cost for US chemical road carriers, an executive at a logistics management firm said on Thursday.

"We are clearly in a new territory," said Warren Hoppmeyer, vice president of marketing and sales operations for Odyssey Logistics and Technology, a US logistics management company that serves the chemical industry.

Oil prices have remained near or above $100/bbl, causing fuel prices to soar, Hoppmeyer said.

A couple of years ago, diesel cost about $1-2/gal, he said. This week, diesel hit $3.55/gal, exceeding Odyssey's forecasts and hitting a new high.

Diesel even broke the level that was reached in the aftermath of Hurricane Katrina, when a force majeure was in place, Hoppmeyer said.

"We are clearly in territory that we have not seen before," he said. "It is just unpredictable at this point."

Aggravating the fuel costs is the US refining capacity, he said. Moreover, oil has broken $100/bbl at a time when refiners are switching from producing heating oil to summer fuel blends.

As a result of rising costs, road carriers are finding new ways to manage fuel consumption, he said.

For Odyssey's part, it is setting up contracts with carriers that strike a balance between the line-haul rates and the fuel surcharges, Hoppmeyer said.

"We view fuel as a pass through for the carriers," he said. "We try to make it cost neutral for us and our clients."

By: Al Greenwood
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