In the three years to 2017, market prices have been nearly stagnant, growing only at an estimated annualized rate of 1.2%. Increased demand for trucking services has been the primary driver of rising prices, although falling oil prices (and thus, fuel surcharges) have been keeping price growth slow during the past three years.
Rising demand for cargo transportation services, including truck transportation, has been the primary driver of increasing market prices. Total trade value has grown significantly, indicating that more goods need to be transported to and from major ports and hubs and boosting demand for carriers’ services. Additionally, the IPI has been rising, boosting demand for trucking services because the manufacturing industry accounts for roughly 60.0% of long-distance trucking revenue. As such, rising demand has allowed suppliers to raise service prices without fear of losing business.
Increasing wage costs to suppliers have also contributed to service price growth. As a result of regulations passed in 2013 that limit a driver’s allowable hours of service (see Regulation section), carriers have required more drivers and trucks to move the same amount of freight. As a result, suppliers’ have had to grow their workforce, causing their wage payments to rise. This rising cost has been passed on to shippers in the form of higher freight rates.
However, price growth has been relatively subdued as a result of declining fuel prices. Because changes in carriers’ fuel expenses are passed directly on to buyers through surcharges, falling fuel prices have effectively constrained growth in service prices, benefiting buyers greatly. However, significant year-on-year fluctuations in the price of crude oil have contributed to high volatility in the price of national trucking services. High price volatility detracts from buyer power by making it more difficult to budget for future national trucking service expenses, decreasing the attractiveness of long-term contracts. Nonetheless, buyers are encouraged to contract this market’s service sooner rather than later, before prices rise further through 2020.
During the three years to 2020, the price of national trucking services is expected to rise at an annualized rate of 2.2%. Rising demand and a return to growth in oil prices are forecast to drive faster price growth, to the detriment of buyers.
Heightened demand for truck transportation will continue to drive this market’s price growth. Namely, total trade value, the IPI and the number of businesses are forecast to continue rising. Increases in these drivers signify a greater demand for shipping among key buyers of market services, which will contribute to rising service prices.
Additionally, overall trends in suppliers’ input costs will support price growth. Truck prices will rise moderately as carriers’ fleets incorporate newer, more fuel-efficient technologies. Crude oil prices are expected to spike after declining during the past three years, and the rapid rise in diesel prices will be passed to buyers through heightened fuel surcharges. IBISWorld estimates indicate that the world price of crude oil will spike significantly as global demand picks up and oil production slows. As a result, suppliers’ diesel costs will swell at a similar rate, forcing market prices upward. Furthermore, suppliers’ wage costs will continue to increase, further encouraging carriers to boost service prices. Nevertheless, a high level of competition in the market will pressure suppliers to keep their prices competitive, preventing market prices from growing even faster.
Buyers will benefit somewhat from lower price volatility during the next three years, although national trucking prices will still be moderately volatile. Although the world price of crude oil typically shifts drastically from year to year, crude oil (and consequently, diesel fuel) prices are forecast to rise more steadily during the next three years, causing carriers to adjust their fuel costs less frequently. As such, service prices will move with only a moderate level of volatility. Even so, moderately volatile prices detract from buyer power somewhat by making it more difficult for buyers to budget for future shipping expenses. Buyers are therefore encouraged to secure shipping contracts and build relationships with their desired carrier or broker, if possible.