Fuel price woes

From the June 2022 print edition

Happily, while the COVID-19 pandemic and its attendant restrictions hit supply chains hard, many such rules appear to be fading from much of our daily lives. Even Shanghai’s two-month lockdown appears to have lifted, at least for now. Yet the strain to global trade that lockdowns caused showed how important diversified supply chains are. China may well do it again with little notice.

While that crisis may have eased, another one looks to be ongoing in the form of high fuel prices. Those prices have effects that ripple through industry and supply chains.

Refiners around the world are scrambling to keep up with soaring demand for gasoline and diesel, which is pushing prices up. This is aggravating shortages. Fuel demand is once again as high as it was before the pandemic, yet some lingering restrictions, sanctions on Russia and other factors mean those refiners are stressed.

The three biggest refiners – China, Russia and the US – are all under their peak processing levels. That makes it tough to keep prices low.

‘At the same time, the 27 EU governments have agreed to ban purchases of Russian crude oil and refined petroleum products such as diesel by year’s end.

While the EU said the move was ‘temporary,’ the price of Brent Crude went above $US120 a barrel on the news. That’s the highest it’s been since March.

Obviously, this has meant higher fuel prices for supply chains. Cargo ships often use diesel during part of their voyage. As well, most goods must be transported by truck at some point, often during the last mile of delivery. Higher diesel prices are a blow to the trucking industry, which already faces driver shortages and a capacity crunch.

All this trickles down to consumers in the form of higher prices for goods. Higher fuel costs are part of what’s increasing the prices of, well, everything.
Surging fuel prices affect industries as varied as transportation, manufacturing, mining, construction and others. In Toronto, as I write this, according to the CAA’s online calculator, average gas prices are 201.8L; in Halifax, NS, the price has hit 202.9L; In Calgary it’s a merciful 171.4L, and in Vancouver it’s a whopping 220.4L.

There are steps that supply chain professionals can take to try to mitigate high gasoline and diesel prices – whether it’s looking at product packaging, reducing vehicle idling when possible, or consolidating orders.
There is also some good news out there. Container shipping costs, for example, have dropped this spring from the highs they hit back in September 2021.

But with Canada dealing with record-high fuel prices and the war in Ukraine having no end in sight, we’re not likely to see those prices drop for a while yet.

Michael Power is editor of Supply Professional magazine.