Will High Oil Prices Change The Logistics Landscape?
June 12th, 2008
It is hard to know where oil prices may go next week let alone in 10 or 20 years but one thing is for certain – any country with little of its own oil, whose Govt isn’t prepared to subsidise its retail price needs to look carefully at its logistics landscape. Over the past 20 years or so the combination of road transport deregulation, a lack of investment in rail and relatively cheap oil has produced long road based supply chains for virtually every product which appears on supermarket shelves. Whole industries centralised production on one or two sites and then distributed products nation-wide by truck. The end result – the loaf of bread you buy may have been trucked 1000kms to your supermarket. Thirty years ago it may have been trucked just five or 10kms from a local bakery.
Transport Costs Growing. With high oil prices the economics of centralised production and long supply chains now come into question with production costs falling relative to distribution costs. There are two options for coping with rising national distribution costs – making it easier to move freight by other modes of transport for national distribution and/or a return to more localised production especially for some high volume consumer food items such as bread, milk or fresh fruit and vegetables. It is likely a combination of both could occur and this will have major implications for the transport sector and transport and land use planners.
Smarter Planning Needed. The amount of freight moved long distance by truck may have peaked or be about to peak as coastal shipping and rail become more economic for shippers. Secondly the amount of short haul freight could grow further as localised production increases. This will have implications for Local Authorities already struggling to cope with rising volumes of freight moving through our towns and cities. Planners will have to start thinking smarter than they do at present when it comes to the location of major industrial and commercial developments. They need to take into account the need to minimise the distance freight moves within urban areas and the distance workers employed at such developments have to travel. The practice of plonking huge industrial parks on the outskirts of cities on any piece of vacant land without looking at the transport implications needs to end.
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