The Canadian Oil Economy and its Effect on Transportation to Western Canada
The Oil Boom in Western Canada has been great for the economies of the western provinces in Canada, but has wreaked havoc on the transportation systems that exist in western Canada. Business is booming, but it presents some unique challenges for freight moving into western Canada.
The Imbalance of Freight: Problem Number One
With the growth and boom of the oil industry in western Canada there is massive growth in the demand for materials. You can imagine all the materials used in oil production that takes place in western Canada. These materials include pipes, fittings, trucks, earth moving equipment, tools, processing equipment, chemicals, and all kinds of material used in the production of Oil. Not only are direct supplies in demand but the huge influx of workers that moved to the oil patch need housing, building materials, food, clothing and the like. All this has to be shipped in. In comparison to oil, there is very little other manufacturing going on in western Canada. Agricultural production is the next big industry.
Generally, as economies grow with the influx of people, industry and trade develop and economies also export what they are producing. In the freight world, this leads to a balancing of transportation. Goods are shipped from A to B and then A typically needs goods from B and the truck or train can move both directions with freight. This lowers overall transportation costs. In the case of western Canada, the demand for goods going to the oil patch are all hard goods and the majority of what is exported from the region leaves in a pipeline. You can see the evident problem. There just are not enough trucks to bring freight inbound to western Canada because there just is not enough freight to put on them outbound.
The Cost of Labour: Problem Number Two
As the oil patch grows and booms with the higher barrel price of oil, so does it’s demand for labour. The oil patch pays high wages in comparison to the rest of Canada due to supply and demand. They need labour and as long as the price of oil is high they can afford to pay it. Now imagine what that does as it trickles down through the rest of the economy in western Canada. Truck drivers, construction workers, and other skilled labourers are a prime target for the oil patch. Trucking companies have to be competitive with what truck drivers take home in comparison to what workers for the big oil companies make. Again, it’s a matter of supply and demand. Truck drivers in western Canada demand higher wages in order to stay in the profession.
The Impact of Poor Freight Balance and High Cost of Labour
Higher wages for truckers combined with a general lack of outbound freight make it tough for western Canadian carriers. There’s just not enough freight to get trucks out of western Canada to get the abundance of northbound shipments from the US to Canada. This forces carriers to take outbound loads at far less than cost, and even worse, send empty trucks southbound to the US to get freight destined for the western provinces.
These factors make it increasingly challenging for carriers and shippers to forecast their costs. Pricing on northbound shipments to the west have been steadily increasing for the past few years while the supply has been tight at best.
Ideas to Better Manage Freight Bound for Western Canada
- Order far in advance. Let both your suppliers and carriers know of your needs weeks in advance if possible. This allows your vendors and carriers to better plan your shipments.
- Consider the day of the week you are shipping on. Many western Canadian carriers start their outbound journey early on a Monday morning. If your shipping point is 3 days from, let’s say Calgary, you can expect that there will be more trucks available on Wed/Thurs of the week. Plan your shipment accordingly.
- Limit the need for specialized equipment. If you have 1 skid of heated or hazardous material, it normally makes sense to ship it with the rest of your freight. If trucks are tight, it might make more sense to ship your dry freight separately from heated/hazardous/refrigerated materials.
- Be a shipper of choice. If your origin point is in the US, you want to make it as attractive as possible for the drivers. Make sure your waiting area is friendly and drivers are treated courteously. Get them loaded and out fast. This makes a huge difference in sourcing trucks. Drivers know the good and poor places to pick up and deliver. If you’re a “good” pick up, you’re more likely to get more trucks, faster.
At DSN Chemical Transportation, we have been moving shipments in and out of western Canada for over 25 years. Heated, refrigerated, dry van, bulk tank are all within our expertise. If you have difficult shipments to get moving to western Canada, call the logistics experts at DSN Chemical Transportation today.
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