For most people, sharply rising gasoline prices were the first sign of the economic crisis. The logistics industry felt the problems sooner: Since 2020, global supply chains have been disrupted. Not only was travel severely restricted during the lockdown, but cargo planes and container ships often didn’t even take off. In addition, factories in many countries shut down production. As a result, there was less to deliver, and many companies had to wait a long time for their orders or look elsewhere. In the meantime, things improved again, but then came the Ukraine war.
With the start of the war, prices at the gas pumps exploded. Trade relations with Russia as a major supplier of oil and gas deteriorated, and the feverish search for new sources began. What many private citizens forget: Not only is the daily commute to work becoming more expensive due to rising gasoline prices, but e-commerce logistics, for example, are also costing more as a result. Despite all efforts, the transportation industry is far from being able to move away from fossil fuels. Aircraft need kerosene, ships need heavy fuel oil and trucks need diesel. At present, it is not possible to do without these fuels.
If transportation becomes more expensive due to rising gasoline prices, the goods transported will automatically become more expensive as well. Not to mention the manufacturing costs, which in many cases are also linked to fossil fuels. Of course, logistics companies could choose not to increase their service prices despite the higher burden, but in many cases there is no option. The companies have to operate profitably; if they “pay on top”, they can no longer exist. That would then be the end of many jobs – and supply chains would suffer even more damage from rising fuel prices.
Fuel prices have now, at the beginning of April 2022, passed a temporary peak and are slowly falling again. However, the level remains high and the situation uncertain. Rising gasoline prices could return at any time. German politicians have initiated price cuts that have not yet reached consumers and companies. These reductions are comparatively moderate, especially with regard to diesel, which plays an important role in transport services.
The situation remains uncertain, fuel prices volatile. No one can predict whether we will not see massive increases in gasoline prices again, and if fuel prices do rise, exactly what the impact will be. So far, the logistics industry has always managed to secure the supply of goods, and it continues to work on this.
Overall, the systemic relevance of this important sector is now becoming apparent: Without functioning logistics, literally everything comes to a standstill. And that must be prevented.
Sharply rising gasoline prices are a major problem at first, but they can also become a source of hope. The move away from fossil fuels is due in the near future anyway, and the current crisis could trigger a green boom. In the best case, the switch to environmentally friendly energy sources and technologies will be accelerated enormously, which will not only be good for the climate. We also secure greater regional independence if rising gasoline prices lead us to boost local hydrogen production or create new types of e-fuels, as CO2-neutral as possible.
However, this again necessitates a conversion of the fleets, sometimes more, sometimes less profound, depending on the technical solution. Investments are due, and this in the middle of a crisis-ridden economic situation, fueled by rising gasoline prices.
The green wave would be desirable, but it requires great effort. Then it could catapult us out of the crisis, revive supply chains bit by bit, and at the same time offer our planet the recovery it deserves. Rising gasoline prices would then no longer be worth mentioning because they no longer matter.
Crises have always been the driving force behind new ideas. A rethink is taking place, new ideas are emerging, we are questioning old tracks and well-worn paths. Digitalization can give us the agility we need to respond effectively to problems. Because of the global virtual network, we now have an excellent overview of the transportation movements of this earth.
We no longer focus our eyes on individual supply chains, but see the big picture and thus have many more opportunities to change the system. We can make it more dynamic, more effective and more flexible. In this situation, digitization is therefore a perfect basis for making targeted global changes possible. Then, when crises and rising gasoline prices come our way again in the future, we’ll be far better equipped because we’ll be able to respond to the problems more quickly.
The current crisis includes not only rising gasoline prices, but also temporary store closures that may threaten again in the future. Closed stores are fueling e-commerce, and more and more store owners are going two-track or they have moved completely to online stores. This makes inventory management increasingly important. A well-stocked warehouse also helps to bridge delivery problems and maintain business during short-term crises.
Rising gasoline prices and their accompanying effects have brought us another interesting development: Investors are increasingly discovering infrastructure as a capital investment. Terminals, ports and warehouses have become particularly attractive targets for speculators because such investments are aimed at the long term. The returns are considered stable, which means that money can be saved through the next crisis. In the event of bottlenecks, even more capital often flows in.
The investments could in turn consolidate ailing logistics companies and revive broken alliances. We at ECL therefore think that rising gasoline prices are not the end of everything, but that they can lead to a new beginning across the board.