|UPS estimates a 40% savings in fuel costs by switching to|
Liquid Natural Gas (LNG) from gasoline or diesel.
Most of the 209 responses to this study – conducted this summer by Forbes Insights on behalf of the CIT Group – came from freight and passenger carriers, along with manufacturers, freight brokers and dealers operating in the transportation space, and found that more than eight out of 10 (81%) believe uncertainty surrounding energy policies is hampering global economic recovery.
“This study highlights the fact that transportation executives are preparing for a future of uncertainty, both in terms of fuel prices and regulations,” noted Jeff Knittel, president of CIT Transportation Finance. “In doing so, they are implementing strategic business plans in response to the potential for a protracted era of higher energy costs and growing concern regarding current and proposed emissions regulations.”
Another 81% told CIT that they are updating their fleets to be more energy efficient, with 79% adding that they are doing more to promote their sector’s energy efficiency relative to other transportation modes.
On top of that, more than three out of four (77%) manufacturers are working to develop vessels, trucks and rolling stock that are more energy efficient, with another 64% noting that they are investing in new plants expressly for this purpose. Finally, 84% said they are working more closely with transportation companies to “engineer” greater transportation efficiency, according to CIT’s findings.
Still, despite all of those efforts, 31% believe their customers will still encounter “financial duress” as a result of rising energy costs,
That “duress” is partly due to the greater impact of regulations on energy, especially when it comes to rules designed to control and reduce emissions, those polled by CIT reported.
For starters, 76% of transportation executives said they are “concerned” by current and proposed emissions regulations, with 47% of them adding that the state of emissions regulation is contributing to higher energy costs – a figure that rises to 64% among trucking companies. Overall, 86% say such emissions regulations are adding to operating costs, with 79% adding that regulatory actions are forcing their companies to increase spending on capital equipment.
TL carrier Werner Enterprises touched on the monetary impact upon trucking operators trying to comply with such emission rules within its second quarter earnings report issued back in July.
“We reduced the average age of our much younger truck fleet by half a year during 2011 and 2012, with net capital expenditures totaling $457 million during that two-year period,” the carrier pointed out. “The significantly higher cost of new trucks and resulting higher depreciation expense and related diesel exhaust fluid costs is not being recovered through a single year customer rate review cycle.”
Indeed, 66% of respondents to CIT’s survey felt government policies have driven energy prices higher, with efforts to combat perceived long-term climate change running counter to a near-term economic growth agenda.