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Entering 2022, despite a positive outlook due to the toning down global pandemic, the road freight transport sector, and logistics in general, have faced a lot of uncertainty. Fuel prices, from their lowest point in quite a few years following the initial lockdowns, began to rise and barring a few blips downwards, continued to rise throughout the summer and fall of 2021 and still are concerns of many companies in Europe.
Potential lack of fuel?
One of the concerns is that the European Union will have to find new sources of oil supply, as, by the end of 2022, 90% of the oil incoming from the East will be banned. As of May 2022, when the ban was announced, Russia supplied 27% of the bloc’s oil, a substantial amount. The results, when supply is diminished and demand is still high, are not positive, to put it lightly.
Currently, per the European Commission’s (EC) Weekly Oil Bulletin, automotive diesel oil has dipped compared to its highest price seen in mid-March 2022, and in the EU, reached €1.836 per ton. Last week it was €1.894 per ton of automotive diesel oil in the bloc. Globally, the price of crude oil has also gone down in the past six months, currently sitting at its lowest price point at $79.43 on the New York Mercantile Exchange (NYMEX) as of the time of writing.
While the EU’s foreign policy representative Josep Borrell argued against the fact that the aforementioned ban on oil products was driving up the price and is “completely false,”…qin July 2022 – alternatives have to be found to ensure the integrity of supply chains across the continent. Oil is essential since as much as it would be desired, alternatively-powered trucks are nowhere near the production levels of their Internal Combustion Engine (ICE)-powered counterparts.
Supply chain integrity
The value and importance of road freight transport in Europe and the EU cannot be understated, as, in addition to making sure that goods reach their intended destinations, the sector also creates a lot of jobs.
According to the EC, “the transport industry directly employs around 10 million people and accounts for about 5% of gross domestic product (GDP).” The Commission also added that “effective transport systems are fundamental for the European companies’ ability to compete in the world economy.”
Throughout the past few years, transportation was essential to ensure some kind of normalcy even if the whole world was locked down to prevent the spread of COVID-19, as trucks were at the forefront of deliveries of crucial and regular supplies. The recent shift in the situation in the logistics industry has shippers scrambling for guaranteed capacity, as carriers faced quite the situation in terms of rising costs.
One of the effects of COVID-19 was that the continent’s driver pool has shrunk dramatically, as drivers chose to leave the industry completely in the wake of the lockdowns.
Per the latest European road freight rate development benchmark, jointly published by Transport Intelligence (TI), The International Road Transport Union (IRU), and Upply, the shortage is set to get worse by the end of the year, as the situation “is continuing to put upwards pressure on wages (which make up another third of transport costs), as employers try to remain competitive and keep their drivers.”
The report also mentioned the fact that by the last few days of 2022, 14% of driver positions will be vacant, an increase of 40% compared to a year prior.
“Despite the acute driver shortage in Europe, we continue investing in our drivers’ training through Girteka Driver’s Academy with various programs for continuous skills improvement, as this is one of the ways how we can ensure that our transportation services remain of the utmost quality,” – says Pavel Kveten, COO Girteka Europe West.
Reliability based on scale
While the picture that has been painted so far is fairly grim, the situation is not critical just yet. Much like shippers, carriers also looked for ways to ensure their reliability and service stability, as at the end of the day, a broken relationship between the two could mean less capacity for one and fewer revenues for the other.
Girteka, as the largest asset-based road freight transport company in Europe, has the ability to provide stable capacity. While it has not been immune from any of the factors affecting the logistics industry in the continent, whether it would be the rising operating costs or the less-than-desirable truck supply, the carrier has managed to grow and maintain its fleet of trucks.
As such, stable capacity and scale are some of the major advantages compared to other road freight transport operators, who can be more reliant on third-party capacity. Being asset-heavy comes with another advantage, namely that Girteka uses the latest and most environmentally-friendly machinery out there, in addition to the fact that the fleet has to be maintained and operated efficiently.
Whatever the case might be, the upcoming few months will be filled with uncertainty. The geopolitical situation will continue to have an impact on the economy and the logistics industry in Europe, as forecasts provide little positivity for the coming months. Stability will be the name of the game in the logistics industry, as a customer-centric approach will most likely be the winning formula for those companies looking toward the long-term future.
