The numbers are in, and fuel prices rose significantly across the United States over 2021. Contrasting this with 2020, when prices at the pump were at an all-time low, the increase may seem like a rebound or an attempt to make up for lost revenue. However, scratching the surface reveals there are a number of reasons for the increase, and the forecast is that this is only the beginning. Combine fuel prices with supply chain woes, and trucking companies need to find a way to lower the cost of fuel to keep shipments moving.
What Caused Fuel Prices to Rise in 2021?
2021 was a confluence of events, culminating in high prices at the pump. In the first quarter of last year, people started getting vaccinated. This allowed businesses to reopen and commerce to take place at a more robust rate than during the first year of the pandemic. The surge of fuel consumption allowed the energy sector to raise rates from what they were when no one was traveling. Additionally, a deep freeze hit Texas in February, causing many refineries to shut down, placing a big strain on fuel supply lines. In May, the Colonial Pipeline was hit with a ransomware attack by a Russian cyber group. While this was more of an inconvenience to distribution for a few days than anything else, it did not prevent fuel companies, gas stations, and truck stops from raising their prices well after the fact. Combine this with summer hurricanes, the early onset of winter and the associated heating, and the high demand led to higher prices.
This Is Not the End of Rising Fuel Prices
Market analysts have advanced the idea that fuel prices might come close to, or even exceed $4 per gallon at the pump by the middle of this year. Demand is still rising as the economy reopens, but supply has yet to catch up with the needs of consumers and businesses. When fuel prices bottomed out during the pandemic, oil producers in the Middle East halted a lot of their production. Domestically, between Texas refineries closing and other Gulf Coast producers still recovering from Hurricane Ida, production is much lower than it was a couple of years ago. Add to this pricing inflation, and it is very possible that we could see prices at the pump that exceed those of 2004 to 2007.
Pivoting from Fuel Dependency
Overtly, the easy answer is for everyone in the trucking industry to switch over to electric vehicles. While there is legislation on deck to make that a reality, the earliest date for that to become a reality is 2025. Besides, changes would have to be made to our infrastructure to provide ample charging stations, and trucking companies are not in a position to spend that amount of money to purchase EV fleets. Sure, pivoting away from dependency on a finite resource that has wild price fluctuation is a great goal, but until pragmatic change can occur, the trucking industry will need to find a way to mitigate fuel prices.
A One-Two Punch for Fuel Prices
Even with rising fuel prices, the trucking industry has two very effective methods of keeping their costs low. The first is to use freight factoring. Freight factoring unlocks the revenue that is tied up in unpaid receivables. Single Point Capital provides comprehensive freight factoring to trucking companies and owner-operators alike, increasing cash flow and allowing them to build up working capital to cover fuel expenses without incurring any debt. Our team is able to quickly process receivables from trucking companies and owner-operators and make the funds available to them within a single day. This ensures better cash flow and money on hand to cover fuel costs.
The second way to mitigate prices is with a fuel discount program. Whether you are making purchases at the pump or buying wholesale for your fleet, it helps to get the best prices available instead of telling your drivers to go way off course just to shave off a few pennies when they fill up the tank. Single Point Capital offers the best fuel discount program to all of our freight factoring clients. From discount to fuel credit lines, we keep the trucking industry moving while keeping their expenses low.
Contact Single Point Capital Today to learn more about our freight factoring services, as well as our fuel discount program for the trucking industry.