John’s Blog

October 20^th, 2008

Dear Friends,

The big news is that on Thursday the price of oil dropped below $70 per barrel.  The last time it was this cheap was in August of 2007.  This reflects a reduction of 52% since the oil bubble burst.

Gas and diesel have fallen along with the oil prices with diesel dropping 21.6 cents to $3.659 per gallon.  Gas dropped 33.3 cents to an average of $3.151 per gallon.  Compare this to $4.764 per gallon for diesel just last July.

The oil producing countries will seek to lower production to keep the glut of oil from accumulating but countries outside the scope of OPEC will still pump.  As worldwide demand softens there should be less volatility.

Besides lowering overall freight costs there are other favorable impacts as well.  For our friends in the plastics business and those of us who purchase stretch film and shrink film this is very welcome.  It should take about six months for these lower prices to be reflected in these industries while the freight cost impact will be almost immediate.

Once we get through the election expect the rhetoric about how bad things are to cool off.  The freight market will get another pick up as a second economic stimulus package passes through the Congress.

In the mean time, look for carriers to continue their staffing reductions and reduce fleet size to address the recession.

At Wagner we are being aggressive in our business acquisition activities and there has never been a better opportunity for companies to restructure their distribution center network.  Real estate prices are beginning to reflect this new economic picture and we are finding deals in the marketplace in many markets.

With Wagner’s 62 years of operation coupled with great technology we can put together an operation tailored to your needs.  Let us know how we may serve you further in 2009.

Best regards,

John Wagner Jr