Diesel fuel prices will remain high, but—barring any major, unexpected disruptions in the crude oil market—dramatic price swings are unlikely for the time being.
In 1999, the average U.S. price of diesel fuel was about $0.50 per gallon wholesale and about $1.10 retail. So far in 2012, average prices have been about $3.00 per gallon wholesale and $4.00 retail. The biggest single factor in this increase has been the underlying price of crude oil. Increases in the price of crude have accounted for more than 80 percent of the rise in diesel prices.
Indeed, as Figure 1 shows, the correlation between diesel prices and crude prices over the past 20 years has been remarkable, reinforcing the expectation that suppliers will eventually pass on all price fluctuations, both increases and decreases, to customers. In short, if you want to predict diesel and gasoline prices, you need do no more than predict where crude prices will go—which, of course, is easier said than done.
Article Figures
[Figure 1] U.S. diesel price vs. underlying crude price (in U.S. dollars) 1994 to 2012Enlarge this image
[Figure 2] Light sweet crude oil prices (historical and futures)Enlarge this image
For the foreseeable future, diesel prices will be driven more by crude price movements than by downstream dynamics such as refinery-capacity utilization or supply constraints. Still, it's helpful to briefly examine the dynamics of diesel supply and demand.
U.S. demand for diesel is expected to continue to grow moderately—about 1-percent average annual growth projected for the next 20 years. Given such slow growth, demand is unlikely to be a major factor in diesel pricing. This growth rate is slightly lower than that expected for the economy as a whole because many large industrial users and some fleet operators will convert to cheaper natural gas. The growth rate also is slightly higher than that for gasoline (for which demand is expected to be flat) because federally mandated increases in fuel economy will impact gasoline demand.
U.S. refiners will be able to handle the additional volume required to meet this moderate growth in demand. Refineries have flexibility to change the percentages of diesel and gasoline they produce. Historically, they have maximized gasoline production because of the demand mix in the United States. If demand grows more quickly for diesel than for gasoline, refiners can adjust production to some extent without making significant additional investments.
Additionally, in 2011, for the first time in generations, the United States became a net exporter of refined petroleum products. In short, as domestic diesel demand grows, there will be sufficient domestic supply capacity to meet it.
Where are prices headed?
Enough diesel fuel may be available, but the question on everyone's mind, of course, is: At what price?
The New York Mercantile Exchange (NYMEX) West Texas Intermediate (WTI) futures strip is a month-by-month measure of the expected value of futures contracts on crude oil. Because these contracts are publicly traded, they represent the market consensus on what will happen to crude prices in the coming years.
As Figure 2 shows, the market does not currently expect dramatic swings in the price of crude, and therefore, the price of diesel. (As noted earlier, we can expect diesel prices for the most part to move in tandem with crude prices.) Obviously, the market could be wrong. Indeed, Figure 2 would have looked similar in 2000 or 2005. It's possible that the market may now be failing to account for unforeseen runaway demand in previously low-profile areas, economic crises, political events in the Middle East, or other surprises. When such unexpected events disrupt oil prices, they can potentially cause big disruptions in the price that carriers pay for diesel and in key forecasting variables, such as consumer incomes or inflation rates. That's why it's a good idea to have a supply chain strategy that can succeed even in the face of the unpredictable.
Assuming the forward market is correct, and there will be no dramatic price swings for crude oil, supply chain managers can expect a continuation of the trends of the last three to four years. For example, today's high diesel prices are making long-haul transportation of "heavier" products too expensive, so we should see continued pressure on companies to move production of low value-to-weight products closer to demand centers. Although U.S. natural gas will probably not stay as profoundly cheap as it is right now, it will continue to be cost-competitive with diesel in situations where it is a genuine substitute.
Finally, don't look for any price breaks; the recent significant increase in diesel prices is likely here to stay. Therefore, it's very unlikely that we'll see any significant, sustained reductions in trucking, rail, or ocean freight costs in the future.
Specifically, the new global average robot density has reached a record 162 units per 10,000 employees in 2023, which is more than double the mark of 74 units measured seven years ago.
Broken into geographical regions, the European Union has a robot density of 219 units per 10,000 employees, an increase of 5.2%, with Germany, Sweden, Denmark and Slovenia in the global top ten. Next, North America’s robot density is 197 units per 10,000 employees – up 4.2%. And Asia has a robot density of 182 units per 10,000 persons employed in manufacturing - an increase of 7.6%. The economies of Korea, Singapore, mainland China and Japan are among the top ten most automated countries.
Broken into individual countries, the U.S. ranked in 10th place in 2023, with a robot density of 295 units. Higher up on the list, the top five are:
The Republic of Korea, with 1,012 robot units, showing a 5% increase on average each year since 2018 thanks to its strong electronics and automotive industries.
Singapore had 770 robot units, in part because it is a small country with a very low number of employees in the manufacturing industry, so it can reach a high robot density with a relatively small operational stock.
China took third place in 2023, surpassing Germany and Japan with a mark of 470 robot units as the nation has managed to double its robot density within four years.
Germany ranks fourth with 429 robot units for a 5% CAGR since 2018.
Japan is in fifth place with 419 robot units, showing growth of 7% on average each year from 2018 to 2023.
Progress in generative AI (GenAI) is poised to impact business procurement processes through advancements in three areas—agentic reasoning, multimodality, and AI agents—according to Gartner Inc.
Those functions will redefine how procurement operates and significantly impact the agendas of chief procurement officers (CPOs). And 72% of procurement leaders are already prioritizing the integration of GenAI into their strategies, thus highlighting the recognition of its potential to drive significant improvements in efficiency and effectiveness, Gartner found in a survey conducted in July, 2024, with 258 global respondents.
Gartner defined the new functions as follows:
Agentic reasoning in GenAI allows for advanced decision-making processes that mimic human-like cognition. This capability will enable procurement functions to leverage GenAI to analyze complex scenarios and make informed decisions with greater accuracy and speed.
Multimodality refers to the ability of GenAI to process and integrate multiple forms of data, such as text, images, and audio. This will make GenAI more intuitively consumable to users and enhance procurement's ability to gather and analyze diverse information sources, leading to more comprehensive insights and better-informed strategies.
AI agents are autonomous systems that can perform tasks and make decisions on behalf of human operators. In procurement, these agents will automate procurement tasks and activities, freeing up human resources to focus on strategic initiatives, complex problem-solving and edge cases.
As CPOs look to maximize the value of GenAI in procurement, the study recommended three starting points: double down on data governance, develop and incorporate privacy standards into contracts, and increase procurement thresholds.
“These advancements will usher procurement into an era where the distance between ideas, insights, and actions will shorten rapidly,” Ryan Polk, senior director analyst in Gartner’s Supply Chain practice, said in a release. "Procurement leaders who build their foundation now through a focus on data quality, privacy and risk management have the potential to reap new levels of productivity and strategic value from the technology."
Businesses are cautiously optimistic as peak holiday shipping season draws near, with many anticipating year-over-year sales increases as they continue to battle challenging supply chain conditions.
That’s according to the DHL 2024 Peak Season Shipping Survey, released today by express shipping service provider DHL Express U.S. The company surveyed small and medium-sized enterprises (SMEs) to gauge their holiday business outlook compared to last year and found that a mix of optimism and “strategic caution” prevail ahead of this year’s peak.
Nearly half (48%) of the SMEs surveyed said they expect higher holiday sales compared to 2023, while 44% said they expect sales to remain on par with last year, and just 8% said they foresee a decline. Respondents said the main challenges to hitting those goals are supply chain problems (35%), inflation and fluctuating consumer demand (34%), staffing (16%), and inventory challenges (14%).
But respondents said they have strategies in place to tackle those issues. Many said they began preparing for holiday season earlier this year—with 45% saying they started planning in Q2 or earlier, up from 39% last year. Other strategies include expanding into international markets (35%) and leveraging holiday discounts (32%).
Sixty percent of respondents said they will prioritize personalized customer service as a way to enhance customer interactions and loyalty this year. Still others said they will invest in enhanced web and mobile experiences (23%) and eco-friendly practices (13%) to draw customers this holiday season.
That challenge is one of the reasons that fewer shoppers overall are satisfied with their shopping experiences lately, Lincolnshire, Illinois-based Zebra said in its “17th Annual Global Shopper Study.” While 85% of shoppers last year were satisfied with both the in-store and online experiences, only 81% in 2024 are satisfied with the in-store experience and just 79% with online shopping.
In response, most retailers (78%) say they are investing in technology tools that can help both frontline workers and those watching operations from behind the scenes to minimize theft and loss, Zebra said.
Just 38% of retailers currently use artificial intelligence-based prescriptive analytics for loss prevention, but a much larger 50% say they plan to use it in the next one to three years. Retailers also said they plan to invest in self-checkout cameras and sensors (45%), computer vision (46%), and RFID tags and readers (42%) within the next three years to help with loss prevention.
Those strategies could help improve the brick-and-mortar shopping experience, as 78% of shoppers say it’s annoying when products are locked up or secured within cases. Part of that frustration, according to consumers, is fueled by the extra time it takes to find an associate to them unlock those cases. Seventy percent of consumers say they have trouble finding sales associates to help them during in-store shopping. In response, some just walk out; one in five shoppers has left a store without getting what they needed because a retail associate wasn’t available to help, an increase over the past two years.
Additional areas of frustrations identified by retailers and associates include:
The difficulty of implementing "click and collect" or in-story returns, despite high shopper demand for them;
The struggle to confirm current inventory and pricing;
Lingering labor shortages; and
Increasing loss incidents.
“Many retailers are laying the groundwork to build a modern store experience,” Matt Guiste, Global Retail Technology Strategist, Zebra Technologies, said in a release. “They are investing in mobile and intelligent automation technologies to help inform operational decisions and enable associates to do the things that keep shoppers happy.”
The survey was administered online by Azure Knowledge Corporation and included 4,200 adult shoppers (age 18+), decision-makers, and associates, who replied to questions about the topics of shopper experience, device and technology usage, and delivery and fulfillment in store and online.
Census data showed that overall retail sales in October were up 0.4% seasonally adjusted month over month and up 2.8% unadjusted year over year. That compared with increases of 0.8% month over month and 2% year over year in September.
October’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were unchanged seasonally adjusted month over month but up 5.4% unadjusted year over year.
Core sales were up 3.5% year over year for the first 10 months of the year, in line with NRF’s forecast for 2024 retail sales to grow between 2.5% and 3.5% over 2023. NRF is forecasting that 2024 holiday sales during November and December will also increase between 2.5% and 3.5% over the same time last year.
“October’s pickup in retail sales shows a healthy pace of spending as many consumers got an early start on holiday shopping,” NRF Chief Economist Jack Kleinhenz said in a release. “October sales were a good early step forward into the holiday shopping season, which is now fully underway. Falling energy prices have likely provided extra dollars for household spending on retail merchandise.”
Despite that positive trend, market watchers cautioned that retailers still need to offer competitive value propositions and customer experience in order to succeed in the holiday season. “The American consumer has been more resilient than anyone could have expected. But that isn’t a free pass for retailers to under invest in their stores,” Nikki Baird, VP of strategy & product at Aptos, a solutions provider of unified retail technology based out of Alpharetta, Georgia, said in a statement. “They need to make investments in labor, customer experience tech, and digital transformation. It has been too easy to kick the can down the road until you suddenly realize there’s no road left.”
A similar message came from Chip West, a retail and consumer behavior expert at the marketing, packaging, print and supply chain solutions provider RRD. “October’s increase proved to be slightly better than projections and was likely boosted by lower fuel prices. As inflation slowed for a number of months, prices in several categories have stabilized, with some even showing declines, offering further relief to consumers,” West said. “The data also looks to be a positive sign as we kick off the holiday shopping season. Promotions and discounts will play a prominent role in holiday shopping behavior as they are key influencers in consumer’s purchasing decisions.”