And I was right…until Memorial Day weekend when oil went into orbit ($65 a barrel) and gas looped to $2.60 a gallon. Not good for already tight wallets!
Apparently OPEC thinks it needs $75-$80 a barrel to be comfortable, and any sign of improvement in our economy is seen as opportunity to push the prices higher.
As our friends at the Heavy Treadin’ blog put it, the rise in oil prices is killing the already fragile trucking industry. For April, truck tonnage was down 13% year-over-year…and that was against a crappy April 2008. Businesses everywhere (including the tire biz) are cutting production and rationalizing inventories, which means less trucks are moving less goods from the factory to the warehouse.
“So, the trucking industry is getting walloped, because physical inventories are way too high,” writes Heavy Treadin’. “Common sense will tell you that this will have a proportionally bad effect on the tire industry. Standard, class 8 semis need 18 tires to run. Less tonnage means less wear on existing tires, with a decreased chance for tire failure. In addition, it means that we will probably see an increase in deadheading, where the tractor makes the trip home without hauling any cargo. Again: No trailer = less wear.
“With crude prices nearing $65 a barrel, and diesel on the rise, some truckers may just opt to stay home. Demand is already at anemic levels. A modest increase in travel could send fuel prices soaring above that mark. The high cost of fuel may begin to eat into what little discretionary income people have left. When it does, you can expect the products on the shelf to stay there even longer, worsening an already bleak picture.”
Well said.
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– Jim Smith
