The Effect of Rising Fuel Prices on Nepalese Logistics

When the price of fuel rises, carriers are forced to raise their prices or incur losses. Rising fuel costs have an impact on the entire industry because if it costs more for the freight carrier to transport goods, the shipper is charged more to compensate for the increased costs. Furthermore, if the shipper is charged more to transport, the receiver is charged more to compensate for the additional costs.

The most popular mode of shipping for businesses in the Nepal, accounted for more than 95 percent of all Trucking. Rising diesel costs have a direct impact on trucking companies and their customers, even when combined increased demand to meet faster consumer shipping expectations. Trucking companies apply a standard fuel surcharge to each load to cover inflated fuel prices in order to remain profitable.

Furthermore, rising diesel costs reduce trucking margins through post-delivery, empty-cargo "deadhead" miles, and other component costs, driving up prices even further. 

Already burdened by supply chain issues such as a lack of both storage and port space, ocean shipping costs are rising due to the current price of fuel. Almost all of the cargo destined to Nepal are handled by Indian ports. Often set apart from other methods due to the low cost and higher margins, companies are beginning to look elsewhere as the potential for profit becomes more difficult.

Ocean carriers, like truckers, are offsetting these costs with surcharges because fuel accounts for a large portion of their total cost. Furthermore, many carriers will practice "slow steaming" on ships. This is the process of reducing speed (often to 15 knots rather than 22 knots) to reduce fuel consumption, similar to how trucking companies regulate the top speed of their trucks to reduce fuel consumption. While this cost-cutting strategy slows already-slow shipping times, it reduces costs for carriers while also lowering emissions.

Air cargo has grown in popularity in recent years as many companies increased their investment to avoid supply chain delays caused by other existing options. However, as jet fuel prices rise, the added value of shipping speed—while protecting margins—becomes increasingly difficult to justify.

Prior to today's increased prices and fragmented supply chain, air freight was widely regarded as the most expensive method of transporting goods. According to the International Air Transport Association, jet fuel prices in the United States have risen 82 percent since last year, reaching their highest level since 2008.

Many products and goods shipped by air are frequently packed within the belly of existing commercial planes. With more than half of all air freight transported in this manner, the decline in passenger air travel has had a significant impact on air freight availability on passenger flights.