Covid-19: E-commerce boom offers a lifeline for oil

Bloomberg

Look across the street from your home-office window: chances are you will see a delivery van.
Trucks from Amazon.com Inc and other e-commerce companies have become ubiquitous during the pandemic. In much of the industrialised world, an ever-growing number of vans, trucks, trains and ships are hauling everything from desks to smart phones as consumers turn to online shopping and companies re-stock their supply chains after months of disruption.
For the oil market, it is a potential fillip: in a world ravaged by coronavirus, freight is again growing, in some areas rapidly. And that means diesel.
“Truck traffic is up substantially,” said Gary Ross, a veteran oil market watcher and chief executive officer of Black Gold Investors LLC. “People have money and they’re not spending it on going out to the theatre, they’re buying goods.”
Official statistics reflect what many can see from their window. In the US, for example, large trucks have driven 5% more miles over the last four weeks than they did a year before, according to data from the US Federal Highway Administration.
Freight companies also confirm the revival. James Foote, chief executive of CSX Corp, one of the largest railway companies in the US, says volumes ended the third quarter above pre-Covid levels. US trucking companies, facing a shortage of drivers and high demand, are rejecting about 25% of requests for their business, compared with just 6% on average in 2019, according to Zach Strickland, head of market intelligence for FreightWaves.
“We’ve had a surge of business, and no one really saw it coming,” he said.
The trend matters for the oil market because trucking accounts for about 16% of global oil consumption and almost half of all diesel demand, according to 2019 data from the International Energy Agency.
The surge is expected to intensify in the shopping frenzy before Christmas. Delivery company DHL, owned by Germany’s Deutsche Post, expects its peak shipment quantities to be 50% higher than the same time last year. There’s a boost in freight from companies restoring inventories in supply chains that were disrupted by the pandemic — from car parts to children’s toys.