The Surprising Way Oil Prices Affected ZMac’s Business

ZMAC Capacity Analysis Total Loads 2014 2015 2016

In the transportation logistics industry, the price of oil impacts everything. Beginning in 2014, crude oil prices took a steady downturn. Well, severe nose dive is more accurate. On the first impression, you might think, “That’s great news for the trucking and transportation industry.” And you’d be right. Unless your business is deeply tied to oil transportation. Then, the decline in oil prices has the opposite effect. Devastation. And that was ZMac.

Transportation Logistics Crude Oil Prices

Crude Oil Price History Chart 2017-01-24 Macrotrends
Crude Oil Price History Chart courtesy of Macrotrends LLC

How the price of oil drives our particular segment of business is a bit of an Econ 101 lesson. Transportation logistics, at its bare bones, is a textbook supply and demand industry. Before the dive in oil pricing in 2014, our core customer base was made up of transporting all things oil-related and over-dimensional, except the oil. Meaning, we set up transport for oil well products and equipment such as piping, pumps, and drilling machinery. We coordinated hauling this oversized freight by flat beds coast to coast.

We were busy, and our carriers were busy. Our sales team made a name for themselves as the go-to’s for overseeing oil drilling-related freight. ZMac honed a proven network of pre-qualified carriers who consistently delivered over-dimensional loads to drilling rigs, oil platforms, and refineries. And our oil industry customers were happy. They had a lot of product to move. And we were the intermediaries to make that happen seamlessly.

Then, we hit the summer of 2014. Global oil prices crashed. Simply put, the world started pumping out more crude oil than anyone needed. In a short six months, the price per barrel was cut in half, from over $100 per barrel to under $50, and the finish line for this free fall was nowhere in sight. (Eventually, the price bottomed out at $29.01 per barrel in January 2016.) The plunge upended our global economy. And for us here at ZMac, it did the same to our transportation logistics business.

Come 2015, domestic oil production drastically slowed, with rigs throughout the US sitting idle. An overwhelming glut of flatbed trucks, once used for oilfield work, quickly saturated the market. These flatbeds were now competing for the few loads available to transport. Thinking back to our Econ 101 lesson; with the supply of flatbeds high and the demand low, pricing plummeted. At ZMac, our average revenue per load dramatically dropped over 30%.

We saw the writing on the wall.

ZMAC Transportation Logistics Capacity Analysis Total Loads 2014 2015 2016

For our once thriving transportation logistics business to survive, we needed to transform how we do business.

And that’s exactly what we did.

Stay tuned to our blog to find out the extraordinary steps ZMac took to redefine what we do. And be the best at it.

Can’t wait that long?
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