Mergers, renewable energy and an ongoing driver shortage are just a few of the trends impacting the logistics industry.

The logistics industry impacts every part of our lives. From the food we eat to the fuel that powers our vehicles, it is essential to the stability and success of America’s consumer economy.

It goes without saying that 2020 was a challenging year. As the fuel logistics industry, and the world economy at large, continues to recover, let’s take a look at some of the trends that will shape the next year and beyond.

Driver shortage continues

According to the American Trucking Associations (ATA), over 72 percent of all freight is transported on America’s highways. The trucking industry’s drivers are the connecting arteries of commerce upon which some of the nation’s most important economic engines rely. To put it simply, they’re kind of a big deal.

Although America’s driver shortage isn’t a new phenomenon, the problem has certainly intensified in recent years. When the COVID-19 pandemic destabilized the U.S. economy in early 2020, the need for drivers declined as freight demand decreased. However, the decline was only temporary, and demand is already making a comeback. With demand predicted to continue outpacing supply, the shortage is only projected to get worse. A recent report by the ATA stated the industry needs to hire nearly 110,000 drivers a year over the next decade to keep up.

The rise of renewables

In January of 1901, Patillo Higgins and Anthony Lucas struck black gold near Beaumont, Texas when one of their Spindletop wells began gushing around 100,000 barrels of oil a day for nine days straight. The discovery launched the U.S. into a leading position in the ongoing Oil Age and significantly increased production and consumption of petroleum-based products.

Since then, the world’s reliance on petroleum hasn’t waned. That, however, is beginning to change as climate concerns take center stage and alternative energy sources gain prominence. The U.S. Energy Information Administration recently released their Annual Energy Outlook, which stated that the adoption of biofuels such as ethanol, biodiesel, renewable diesel, and biobutanol will increase through 2040.

And that’s not all. Many trucking companies are making substantial efforts to reduce their carbon footprint, with some setting goals to become emissions free by a certain date. For example, Walmart recently announced its intention to electrify all its vehicles, including long-haul trucks, by 2040. The industry is also investing in hydrogen fuel cell technology, something that’s particularly useful for trucks that travel long distances. Though the technology is still in its beginning stages, the progress is promising as several major auto manufacturers, from Toyota to Volvo, are joining forces with other companies to make it happen.

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Freight growth rebounds after an unexpected decline

Total truck tonnage hit an all-time high of 11.84 billion tons in 2019. The record year marked a 39 percent increase over the 2009 low. The victory lap, however, was short-lived.

On January 20, 2020, the U.S. confirmed its first case COVID-19 in Washington state. As a result of the pandemic, this year, we all witnessed an unprecedented decrease in fuel sales. On a global scale, there was a 35 percent decline in fuel demand in April 2020, but some regions were heavily impacted with some declines reaching a staggering 65 percent, based on our fuel demand report.

But fuel carriers weren’t the only trucking businesses impacted by the pandemic. According to the ATA, overall truck volumes are expected to fall by 8.8 percent by the end of 2020. Despite this unexpected setback, the future appears bright. Since their lows in April, fuel volumes have begun to recover. In addition, the ATA’s recently released U.S. Freight Transportation Forecast predicts that freight volumes will grow around 36 percent in the next 11 years, and freight transportation revenue is expected to increase by 45.7 percent in the same time period.

Mergers

Although the economy is generally heading in a positive direction, the ramifications of the pandemic continue to impact the logistics industry. After all, it was only a month ago when gasoline consumption took a dive as the result of several areas around the U.S. issuing shelter-in-place orders in response to a spike in the rate of COVID-19 infections.

This type of volatility is part of the reason the number of mergers and acquisitions in the industry will continue to increase. Companies are seeking to solidify a competitive advantage any way they can, whether that means expanding into new geographies or offering new capabilities to their customers.

In particular, the M&A activity will likely continue to impact smaller carriers, which this year’s coronavirus outbreak hit particularly hard on top of an already challenging and costly regulatory environment.

The key to thriving amid current and future disruptors is to pivot and embrace new strategies. For fuel logistics companies, part of that strategy must be investing in digital transformation. Stay tuned for part two of our blog where we’ll cover digital transformation and technology trends that are impacting our industry.

You can thrive in today’s digital economy. Contact us today to learn how we can help you transform your business.