Good day,
The trucking industry finds itself tied to the shale revolution in two ways. First, the price of fuel is an obvious direct link. But secondly, the shale revolution in the U.S. has created significant trucking demand, particularly in the flatbed market to move heavy equipment, and has exacerbated the squeeze on the supply of drivers. But The Wall Street Journal, on its front page today, addresses the question that has perplexed many observers of the shale industry: how can companies keep growing, and why does capital flow into this sector, when it generates essentially no free cash flow? Investors never seemed to care about this fact. It isn’t new, but they are starting to care now. If the industry finds itself with less access to capital, which has fueled its growth, that could have impact down the line in the trucking sector. Ultimately, trucking companies, when it comes to energy, may want to look at free cash flow numbers from the independent sector even more than the outright price of oil, because it may say more about the industry’s future.
Did you know?
By the third quarter of this year, world oil demand should be more than 100 million b/d, the first time that has ever happened. That number was in the International Energy Agency’s monthly forecast released earlier this week.
Quotable:
“No one entity can fix the qualified technician shortage problem. We all must row in the same direction. The big problem right now is that everybody is sitting on the sidelines and waiting for someone to fix the problem, but that isn’t going to happen.”
— Jennifer Maher, CEO and executive director of TechForce Foundation, discussing programs aimed at easing shortages in skills such as diesel mechanics.
In other news:
Rail shippers vs. railroads strife goes on
A study of rail shippers found some very unhappy customers (The Loadstar)
Ensuring a supply of diesel mechanics
Taking a proactive approach toward the shortage of diesel mechanics and doing it long-term. (Trucking Info)
Hold that candy bar and have a vegetable
Some advice on eating healthy at a truck stop (OPDI Logistics)
Walmart and trucking
The impact of tight trucking markets on Walmart (Business Insider)
NAFTA deadline missed
There was a deadline on finishing NAFTA talks, but negotiators failed to meet it. (Supply Chain Dive)
Final Thoughts
Early in my career as a business journalist, covering the metals industry, I was advised not to use the word “shortage” to describe a market. Other terms like “squeeze” were preferred. And it made sense: classic economics would dictate that what was perceived as a shortage was really only a market imbalance that the pricing mechanism would correct by attracting new supply or decreasing demand. When OOIDA discounts the talk of a “driver shortage,” and instead says it is an issue of pay and working conditions, the organization is reflecting this approach. But if they want to say that, then presumably they will be consistent when they’re trying to get a vehicle repaired and can’t find a diesel mechanic because of the “diesel mechanic shortage.” There is clearly a diesel mechanic squeeze, and the numbers of new mechanics aren’t meeting demand. But if there truly can’t be a shortage, that it is just a function of the pricing mechanism, then there is no diesel mechanic shortage, just like there’s no driver shortage.
Hammer down everyone!