The Implications Of Rising Fuel Costs To Freight Transportation In Australia

Background information on Australia’s freight transportation industry

Question:

Write an essay about the implications of rising fuel costs to freight transportation. 

Rising in fuel cost can become a headache for any country because transportation plays a key role in the countries overall growth. The rising in fuel cost can be affected by few factors when demand of liquid fuel is huge in the international market; also we are considering here Australia’s freight transportation so the price of fuel is set in US dollars therefore the value of AU dollars and the US dollars are not same. However the impact of this issue is very serious in freight transportation of Australia.

In this research easy it is going to be discussed the impact of rising fuel cost to freight transportation in Australia. What are the causes and the factors affecting related to this issue also it is going to be critically analyze to find out the possible outcome for this issue.

Therefore it is going to provide few recommendations and solutions to overcome from that issue and by following which methods the rising price of fuel can be reduced.

The roads and transports are changing in Australia in a frequent manner, as the rise in price of fuel and the demand for fuel is higher than the supply has become a barrier to the overall growth of Australia. The price of oil has reached to sky level in recent years as the evidences shows that it is not going t be normal in the coming years, the time of cheaper fuel is over now. As the price of per liter fuel is almost crossed the $2.00 mark the Government is also invigorating everyone to face the tough situation ahead.  In 1970’s there were a similar kind of situation happened what Australia is facing now. (Torr, F 2008)

As we have seen that Australia’s freight transportation have contributed $94 billion revenue in 2012. That was a major gain for Australia; this freight industry includes road, rail, sea, and air freight. The road freight is not only has not only contributed to 84% of the total freight but also have more than half of the profit came from this. Australia’s freight and logistics transport plays a key role in overall economy as it is contributing 15% to the national GDP. More than 1.5 billion tonne- kilometers of goods traveled every day and more than 5, 85,000 people are employed in this sector. Also agriculture and the local delivery system are dependent over the freight transportation. As a result this sector is considered as the most valuable part in the economy. (Hodgson F 2014). 

But due to the uncertainty and the rise in fuel price it has become a headache and a barrier to the growth of this particular industry. The high price has affected the supply chain strategies badly, just take an example of Australia’s agricultural and day to day product which is totally dependent on freight transportation for reaching one place to another, due to the rising fuel price the transport owners are charging high from the wholesalers and distributors for shipping their goods from one place to another therefore on the other hand wholesalers are increasing the price of the product or goods to bare the extra cost, which is hitting the pocket the general public. This is just a common thing if we go little broader and deeper then the situation is more dramatic.

As we know that Australia is also known for exporting products like Coppers, Meats and Precious metals. Due to the effect of high fuel price we have seen that there is a decrease in exporting such items because of high transportation freight cost, due to that higher transportation cost either they have to increase the price of these items or individually they have to bare the price. In both ways it is a loss for Australia’s global market, if they increase the price of such items it will create a bad impression to the global market also if they don’t then they have to bare the loss and the profit margin will decrease. This issue has not only hitting the Australia’s national market but also globally as the value of AU dollars decreases. (Hodgson F 2014)

The impact of rising fuel costs on the freight transportation industry in Australia

Every issue has a cause the price of fuel does not change overnight. One of the major reasons of high price is the demand for fuel has increase but the supply is low. As we all know that the Middle Eastern countries are the major exporter of liquid fuel in the world and Australia is one of the major importers of fuel from them. Due to the increase in demand of fuel in developing countries like China and India the supply became less therefore price has increased.

There is another reason says that in next few years the Earth’s natural reserve oil is going to be over this has also causing to price hike.

This is just a present scenario but if we don’t take any action regarding this issue then the future scenario is going to be tougher than this, we have t find out the proper solution to overcome from that situation.  

Based on that issue there are few recommendation plans to overcome from that situation:

Limitations in vehicles speed- By avoiding aggressive driving, all vehicles consumes extra fuel at speed above 55 mph. Speed limit can be a solution if the Government come up with a new rule by deciding minimum and maximum speed for each different segment of vehicles, in that case there will be low consumption of fuel by applying this rule we can reduce the extra consumption of fuel.

Using of electric power- As we all know that petrol and diesel are not the only source of power. There are some other options available like coal, electric power. Yes this can be an option now days as we have become more dependent on petrol and diesel we have forget the usage of other power sources, by using such power sources we can save the liquid fuel.

Avoiding extra load on vehicles- Sometimes vehicles get overloaded and carry goods more than its capacity level. Overloading of vehicle can increase the fuel consumption level more. Therefore we should always maintain the capacity of loading.

Keep the windows closed- While driving tries to keep your vehicles window down, if the speed of the vehicle is below 35 mph then always keep the window down. However if the speed is higher than this then keep the window up, this technique will reduce the drag and improve the fuel consumption of vehicle. This technique can be valuable for road freight transport.

Replace dirty air filters– Dirty air filters of vehicle always cause an engine to work harder than normal and consume more fuel. Therefore always clean the air filters and replace it if needed. This will make an engine to work more efficient and effectively and save fuel.

Buy more fuel efficient vehicles- Technologies are changing frequently so in the field of motor vehicles. By taking the advantage of those technologies buy more fuel efficient vehicles replacing the older one.

Maintain the proper inflation of tires- Always maintain the proper inflation of the vehicle’s tires. This can reduce the fuel consumption rate up to 3%. Also tires of the vehicle lose 1 PSI every month and when tires get cold pressure decreases because of the thermal contraction of air. If the tires are properly inflated this will help in smooth driving and provide better fuel efficiency.

Causes and factors affecting the rise in fuel cost

Cruise control- Cruise control can be a good option for road transport to save fuel while driving on hill areas. It maintains the speed over hill areas and provides a balance in engine to reduce the maximum usage of fuel; also modern cruise system has an inbuilt technology called ‘droop’ system this helps to gain the speed without use of maximum power of engine.     

Optimizing the route- By optimizing the route and rescheduling the route we can minimize the extra time taken by a vehicle this will reduce fuel consumption.

Optimizing the packaging- Packaging plays a key role in handling products from one place to another. If we optimize the packaging system this will help in one time delivery of products and reduce the chances of extra shipment of product also it does not need to spend an extra time and fuel. This will reduce the fuel consumption rate.

Providing on time fleet management- Fleet management involves all types of vehicles such as: cars, rails, airplanes etc. Fleet management involves various things like maintenance, financing functioning, management of driver and fuel of such vehicles. Fleet management is the process by which vehicle companies reduce the risk involved with vehicles. This can be done either by providing in house fleet management or outsource fleet management. This process can play a major role for reducing the fuel price.

Observing the driver behavior- As we know that all drivers are not skillful. Therefore by taking data from vehicle tracking system we can observe the driver’s behavior how much driving skills he or she has. Whether the driver is taking extra time to reach the destination place at what speed he or she is driving, and also we measure the fuel consumption rate.

Avoid driving in rush hours- Time management is very important, there are some rush places where traffic jam is more and if you got stuck into a traffic jam it spends more time and fuel. So it is better to set a particular time for driving. Drive during the rush hours as much as possible.

Turn the air- conditioning off- Do not use the air conditioning system unnecessarily because this uses quite a bit of fuel. 

Conclusion

As we have came across the issue of rising in fuel price to freight transportation we have observe that this is a major problem which Australia faces now days. Because this issue has led down not only  the country’s  economical growth but also in some other areas like social development peoples social life get affected, due to the rise in fuel price the price of grocery and other daily consumable products has increase which has hit the pocket of normal person and his/her daily budget. This issue is not only limited to domestically but also internationally like value of AU dollars decreases and created a bad impact on country’s import export business. Although it cannot be changed in overnight things take time be normal. We need better policies and ideas to cope up with this kind of situation. It is not only the duty of Government to take necessary actions on it but also normal citizens. Yes it is right that fuel price has increased but it has increased not only because of the consumption of freight transportation, a normal person is also involved in this because now days every one owns a car, motorbike etc. How many of we really think about saving fuel while driving, this is the time to think about it. It is not only thinking but also taking actions on it, rather choosing a personal car we can opt for some other options like bicycle, public transport etc. Because fuel is a natural resource and everything ends a day. The day is not so far when there will be no petrol and diesel. Therefore it is our duty to save the natural resources.

References

Morris, H 2012, the fuel prices crisis, viewed 16 June 2016, 

Torr, F 2008, Rising Petrol Prices: Changing The Transport Landscape, Melbourne Australia, viewed 16 June 2016,

Hodgson F 2014, Transport and logistics inside, viewed 16 June 2016,

Russell, D. J, C & Ruamsook 2014, the real impact of high transportation cost, 

Merkert, R 2015, Fuel hedging and its impact on airlines and airfares, viewed 16 June 2016, 

Gal, L 2006, The oil crisis and its impact on the air cargo industry, Institute for the analysis of global security,

Stott, J 2005, The outlook for our cities in an age of oil depletion, viewed 17 June 2016.