When the Dow Jones Industrial Average closed at a new high of 11,727.34 on October 3 and rose another 123.27 points the next day to 11,850.61, many economists attributed the record to falling oil prices. Indeed, crude oil futures had plunged more than $4 in the previous two days to $59 per barrel on the New York Mercantile Exchange. Three months earlier, oil had traded at $78.40 per barrel.
Diesel fuel's average national price had just fallen 4.9 cents from the previous week to $2.546 per gallon, according to the Department of Energy. This was the seventh consecutive weekly decline, bringing diesel prices to 59.8 cents less than a year ago. Gasoline prices also continued to drop, averaging $2.31 per gallon nationwide.
Both for companies and consumers, lower fuel prices translate into fuller coffers because less money finds its way to oil-exporting countries for fuel, so the US trade deficit with those nations shrinks.
An article in the October 9 issue of BusinessWeek put forth the notion that falling oil prices presents a potential problem. It involves the tendency of overseas oil producers to put much of their profits in U.S. Treasury bonds, keeping long-term interest rates low.
“If oil prices tumble to $50 per barrel, the boom in petrodollar purchases in US securities could evaporate,” wrote Catherine Yang. “That would affect long-term interest rates almost more than almost anything the Federal Reserve could do.”
Others, however, contend that US investors will fill some of the gap by buying more government bonds. This uncertainty typifies the complexities of the interrelationships between the oil market and the overall economy.
Perhaps a bigger problem is the prospect that lower fuel prices will make Americans forget about the need to conserve. The Department of Energy estimates the US will account for nearly a quarter of the world's oil consumption in 2006. In 2004, the trucking industry consumed 51.4 billion gallons of fuel, accounting for 67.2% of total consumption by mode of transport, according to the American Trucking Associations.
Besides leaving the trucking industry less dependent on oil-exporting foreign nations, many of whom remain unfriendly to the US, efforts to economize on fuel can have a very real impact on the bottom line - and the environment.
Wal-Mart, which operates one of the largest private trucking fleets in the world, plans to double new truck efficiency by 2015 while keeping 26 billion pounds of carbon dioxide out of the air by 2020. The company said it expects its transportation innovations to produce a net saving of at least $494 million annually by 2020.
Wal-Mart's 2007-generation truck proves its commitment to fuel efficiency by incorporating a number of innovative elements, including:
• Super single tires that combine the two wheels normally seen on a rear axle into a wheel not quite as wide as the sum of two wheels, resulting in a smoother ride and improved fuel economy from the reduced surface area and improved tire wall stiffness
• Trailer side skirts that significantly reduce wind resistance and airflow around the trailer
• Tag axles that reduce the weight of one real axle by eliminating axle-drive train
• Auxiliary power units that eliminate the use of the tractor's main engine for keeping drivers warm or cool at night, relying instead on a very small diesel engine that does the job at optimum efficiency.
We fully expect that SC&RA member companies ultimately will embrace these and other sensible elements. For more information on simple actions that can be taken to make trucking more efficient, visit the Environmental Protection Agency's SmartWay Transport Partnership web site at: www.epa.go/smartway