Impact of Hurricanes on truckin industry utech news News

How Have Hurricanes Irma and Harvey Affected the Trucking Industry?

09.28.2017 - 5:22 PM Comments: 0

Hurricanes Harvey and Irma have left a huge devastation in their wake. A lot of rebuilding efforts are up in both Texas and Florida. It will be some time before the people in these two states get their lives back up and running. These two mega storms have brought every aspect of life to a standstill, including logistics and transportation. The hurricanes have negatively affected three crucial aspects of the trucking industry – gas prices, transportation infrastructure, and the demand-supply dynamics.

Gas Prices

Hurricane Harvey had the biggest effect on the gas prices. 30% of America’s fossil fuel comes out of Texas. It is a hub of refineries and major intermodal stop for oil and gas shipping. When the hurricane shut down 10 refineries in Texas, there was an immediate spike in gas and diesel prices all over the country. Some regions noticed as much as 15% spike in gas prices. This has strained the freight rates, which too have shot up. How Have Hurricanes Irma and Harvey Have Affected the Trucking Industry? did not have a major impact on the fuel supply over the rest of the country. It did cause a severe shortage of gas in the Florida state, which resulted in gas price hikes there. But, it was more a localized effect.

Transportation Infrastructure

The remarkable strength of hurricane Irma has brought down electric poles on the roads, caused power outages, destroyed roads, have uprooted gas stations and laid waste to auto repair shops in many parts of Florida. In the aftermath of the hurricane, unable to rely on systems that they have taken for granted such as reliable roads, fuel supply, and easy repair access, the truckers found it risky to carry out their operations. Naturally, freight rates in the region rose. Things have changed dramatically over the course of the past few weeks. The transportation infrastructure is all but revamped now. As for Houston, it’s a different world altogether. The intense flooding left many parts of the city inaccessible for many days, even after the storm cleared. In fact, the rescue efforts were being conducted using boats and canoes. Except for large monster trucks, no other vehicles could navigate the city for a long time. Thankfully, the past few weeks have witnessed major improvements, and roughly 90% of the trucking traffic in and around Texas has rebounded.

Supply-Demand Strains

In the anticipation of the hurricanes, the shippers as well as receivers rescheduled their fright deliveries causing bottlenecks right before the storms and after it. Before the storms, there was a sudden increase in demand as people wanted to get their shipments just before the storms. Quite understandably, shipping rates shot up. This was followed by a drop in demand for shipments during the storm period. Once the storms abated, there was a sudden rise in demand, which was not met with an equal amount of supply due to logistical challenges caused by storm damage. When Katrina hit, the annualized price hike for shipments was 7 percentage points. This time, it is expected to be far higher. With Floridians and Texans trying to rebuild their lives, there is now a strong demand for everything from groceries to construction supplies. The retailers, whose shelves had run out of supplies, are now restocking themselves at a frenzied rate. Truckers that are delivering the shipments are not returning from Florida and Texas immediately. They are lingering there in the hope of return business. This is good for the states, because this means that the shipping costs are coming down.

Final Thoughts

The damages caused by the hurricanes to the trucking business are not limited to the short term. Long-term shipping contract rates are being renegotiated right at this moment. This means higher transportation costs, which translates to higher prices on everything you buy in the future.

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