High fuel prices draining global economy: report

by Canadian Shipper

NEW YORK, NY– According to transportation executives polled in a recent study, the forecasts and business strategies of carriers and manufacturers of transport-oriented capital goods indicate the industry is bracing for an era of higher energy prices and increased regulations.

 “Transportation Outlook” (cit.com/TransportationOutlook) was released this week by CIT Group Inc. provider of customized leasing and financing to end-users of aircraft, locomotives, railcars and ships. The study was conducted by Forbes Insights on behalf of CIT.

 “This study highlights the fact that transportation executives are preparing for a future of uncertainty, both in terms of fuel prices and regulations,” said Jeff Knittel, President of CIT Transportation Finance. “In doing so, they are implementing strategic business plans in response to the potential for a protracted era of higher energy costs and growing concern regarding current and proposed emissions regulations.”

Among the key findings, the study said that fuel prices and rising energy costs are impacting the global economy. 

More than eight out of 10 (81%) executives said uncertainty surrounding energy policies was hampering global economic recovery.

Eighty percent said that today’s higher fuel costs are reducing global economic growth.

Transportation executives believe the global economy is poised for a protracted period of increasing energy costs. More than six out of 10 (63%) believe prices will increase over the next 18 months, 78% expect prices to increase over the next three years, and 69% believe prices will increase over the next five years – 38% say significantly, the study noted.

Sixty-six percent of respondents said government policies have driven energy prices higher, while efforts to combat perceived long-term climate change run counter to a near-term economic growth agenda. More than eight out of 10 (83%) agree that relatively high fuel prices are contributing to higher consumer costs, and 81% agree that higher fuel prices are impacting consumer spending in other categories.

Roughly three out of four (76%) transportation executives are concerned by current and proposed emission regulations, and 47% say that the state of emission regulation is contributing to higher energy costs – a figure that rises to 64% among trucking companies. Overall, 86% say such emission regulations are adding to operating costs. Moreover, 79% say regulatory actions are forcing their companies to increase spending on capital equipment.

Nearly half (47%) of carriers said their customers are working more closely with third-party logistics groups to optimize transportation costs, and 35% said their customers are relocating production or warehousing for the same reason. Nonetheless, 31% said they see customers encountering financial duress as a result of energy costs, 81% said they are updating their fleets to be more energy efficient and 79% said they are doing more to promote their sector’s energy efficiency relative to other transportation modes.

Meanwhile, more than three out of four (77%) manufacturers said they were working to develop vessels, trucks and rolling stock that are more energy efficient. Sixty-four percent are investing in new plants expressly for this purpose — 24% extensively. And 84% said they are working more closely with transportation companies to “engineer” greater transportation efficiency.

Ninety-four percent of executives consider oil an important fuel for their company, while 90% said the same of natural gas. The figures drop sharply for coal: only 55% use the fuel and only 34% extensively. However, 76% of rail respondents said the fuel is important.

Complimentary copies of the report can be downloaded at cit.com/TransportationOutlook.

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