Biden Releases 1M Barrels/Day From Strategic Reserve, Shippers Hope for Results

In an unprecedented response to rising oil prices, President Biden has announced significant changes in hope of decreasing the cost of oil and fuel surcharges. On March 31, 2022, President Biden announced initiatives to encourage the domestic production of energy-efficient technology and crude oil supply. Still, he also declared the immediate release of one million barrels of oil from the strategic oil reserves per day for the next six months. Reuters commented on this extended release by adding, "Biden's 180 million-barrel release is equivalent to about two days of global demand and marks the third time Washington has tapped the SPR in the past six months." This move comes on the heels of additional fuel surcharges from both FedEx and UPS. This article will address the importance of this release and its impact on the supply chain.

What Caused the Biden Administration to Release Part of the US Strategic Oil Reserves

In President Biden's press conference, he shared that the two primary causes of this enormous strategic oil reserves release were COVID-19 and the Russia-Ukraine conflict. Over time, the unexpected ramp-up in uncertainty across all factors caused high fuel costs impacting transportation in every form and causing parcel carrier fuel surcharges. While some may argue against this move, it is a sign that uncertainty is the biggest factor in transportation management, and while primary causes, there were other factors at play in the transportation industry. These other influences ranging from labor to equipment shortages and beyond to e-commerce growth.

In response to continued rising fuel prices, both FedEx and UPS have implemented higher fuel surcharges as follows, effective April 4, 2022:

  • FedEx Express and FedEx Ground Surcharges rose to 21.75% for Domestic and US to Puerto Rico. Export surcharges rose to 24.25%, while imports rose to 28%.
  • UPS implemented a 15.25% Ground Surcharge, a 20% Domestic Air Surcharge, a 23.25% International Air Export Surcharge, and a 27% International Air Import Surcharge.

As always, these surcharges are based on data from prior weeks, and the on-highway diesel fuel apices for this disruption are not yet known. However, the Biden Administration is working to curb its effects.

How the Release Could Help Improve On-Highway Diesel Prices and Lessen the Burden on Shippers

As the amount of nationally available crude oil supply increases, shippers are hopeful to see a price change on fuel costs sooner than later. However, oil prices are still dependent on OPEC, and the final chapter on oil pricing is yet to come. Still with lowering fuel costs, parcel shippers look forward to a slight relief in fuel surcharges that provides an opportunity to focus on optimizing transportation spending. additionally, shippers should stay cautious and realize that meaningful fuel cost reductions are still far from the reality of today.

Critical business decisions such as freight network optimization are possible when carriers have the financial leeway to offer competitive pricing to shippers focused on finding dedicated carriers or other creative solutions. The strategic oil reserves release could even improve inflation across the country due to fuel's critical impact on the cost of everyday items. A change in inflation may even help customers spend more on commodities. That, in turn, will continue to stimulate the supply chain and the economic recovery from the first wave of unprecedented times.

What Else Can Shippers Do to Attract More Customers and Avoid Excess Shipping Costs?

The strategic oil reserves release will provide more financial flexibility for shippers to get their products where they need them. Despite this "breathing room" after a tense few months of rapidly increased costs, it's important for shippers to maximize their time by optimizing their business operations. A few suggestions include:

  • Track transportation spend by mode, lane, and other granularities. The first step to staying strategic is to track all transportation spending to the penny. A thorough inventory of costs separated into their categories provides accessible, accurate data.
  • Unify all data within a single source of truth. Shipping companies should unify their data by integrating every related source into a central system. This centralized source of truth becomes an accountability source to ensure necessary data is not lost.
  • Normalize data to enable apples-to-apples comparisons. Because shipping companies utilize various technology resources, the data collected will be in different forms. By normalizing data, it's easier for shipping companies to graph efficiency and costs correctly.
  • Gain actionable insights through machine learning-based anomaly detection and correction. In addition to tracking, unifying, and normalizing data, shippers can avoid excess shipping costs by leveraging machine learning technology to scan freight data for inconsistencies. A high-quality tech can provide alerts faster than noticed with manual data management.

Stay Future-Ready for Supply Chain Recoil With the Right IT Logistics Provider, Intelligent Audit

The release of strategic oil reserves will likely increase the economy and supply chain flexibility to respond, but uncertainty is the absolute factor driving all decisions around projected fuel costs. Although many supply chain professionals will simply enjoy this decision's financial benefits, those invested in business resilience will use this time to stay and grow more future-ready. Intelligent Audit is an experienced, proven business logistics solution that can aid businesses in doing just that. To learn more about the advantages of using your data for your good, start a conversation with Intelligent Audit today.

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