BLOOMINGTON, Ill. — It turns out that severe weather disruptions almost always involve water.
Since the most potent source of water is evaporation from the ocean’s surface, the majority of U.S. weather disruptions are near salt water coasts.
And, because people and businesses like to be near coasts, oceanic storms have big effects, including on transportation.
Hurricane Harvey is no exception, according to FTR, which says it has quantified preliminary numbers, gauging the impact in the overall trucking market.
Hurricane Harvey’s broad swath across Texas will strongly affect over 7 percent of U.S. trucking, with some portion of that fraction out of operation for two weeks.
During the first week, almost 10 percent of all U.S. trucking will be affected, FTR said
That number jumps to near 100 percent for the Gulf Coast region west of the Mississippi.
After a month, the numbers fall but are still significant, impacting nearly 2 percent (national) and 25 percent (regional).
Because of the already tight nature of the truck environment, this means that loads could be left on the docks.
The largest effects will be regionalized, but transportation managers across the entire U.S. will be scrambling, FTR predicts, point to four broad effects of the disruptions:
FTR has studied several major weather events, starting with Hurricane Katrina in New Orleans. These weather events show significant pricing effects, highlighted by seven extra percentage points of annualized pricing for the five months following Katrina in 2005 and a peak of 22 percent year-over-year spot price increases following the monster winter of 2014.
“Look for spot prices to jump over the next several weeks with very strong effects in Texas and the South Central region,” said Noël Perry, partner at FTR. “Spot pricing was already up strong, in double-digit territory. Market participants could easily add 5 percentage points to those numbers.”
FTR noted that Texas provides 30 percent of U.S. refinery capacity, a production base that will be hard hit by this storm, adding that regional diesel supplies will be strongly affected, with national prices jumping as well.
The nation average on-highway price of a gallon of diesel stood at $2.605 for the week ending August 28, according to the Energy Information Administration of the Department of Energy.
That was an increase of only nine-tenths of one cent, but carriers were bracing for substantial increases in the weeks ahead.
“With companies such as Exon Mobile and Phillips 66 closing down their refineries, we are talking about impacts to fuel and energy,” said Larry Gross, partner at FTR. “In addition, Houston is a big interchange point for rail and intermodal, so it’s not just trucking which will be disrupted. Freight cars are sitting idle outside of Houston. Will they wait out the storm or be re-routed? Of course, those final miles from the railyards are still dependent on trucks. Freight transportation is an integrated system, and this becomes more obvious during major weather events when disruptions occur.”
Perry noted there is also the question of contract rates between shippers and trucking companies.
“There is always a lag between spot rate increases and contract rates,” Perry said. “Analysts have been wondering when trucking contract rates will begin following spot rates up. The combination of regional and fuel effects from Harvey, coupled with the electronic logging device (ELD) mandate in December, could be the catalyst to a pricing spiral.”
For more information about the work of FTR, visit www.FTRintel.com, follow on Twitter @ftrintel, or call (888) 988-1699, ext. 1.