Transportation Outlook: Adapt to the New Normal in Energy Prices

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Information about Transportation Outlook: Adapt to the New Normal in Energy Prices

Published on February 28, 2014

Author: CIT_Group



Learn what transportation executives are saying about ever-changing energy prices and the impact they are having on the industry in our Transportation Outlook: Adapt to the New Normal in Energy Prices.

IN ASSOCIATION WITH: Transportation Outlook: ADAPT TO THE NEW NORMAL IN ENERGY PRICES KEY FINDINGS Freight and passenger carriers as well as manufacturers of transportation-oriented capital goods may not like higher energy prices and stricter emissions standards. They may feel government policies place too much value on environmental gains and too little on economic growth. Nonetheless, despite the views of many economists and recent media reports to the contrary, industry executives believe their forecasts and business strategies indicate: the industry is bracing for an era of higher energy prices. Seeking greater insight into the views and strategic plans of transportation companies, Forbes Insights, in association with CIT (NYSE: CIT), a global leader in transportation finance, executed a survey in June 2013. The sample comprises four sectors: aerospace/airlines, maritime, trucking and rail. While most of the 209 responses come from freight and passenger carriers, the survey also features a strong showing from manufacturers and broker/dealers (from the four sectors). The survey reveals that: • High fuel prices are a significant drain on the global economy • Counter to the views of many economists, industry executives believe higher energy costs can be expected over each of the next cycles: 18 months, three years and five years • A protracted era of higher energy costs requires a strategic response $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ AUGUST 2013 $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ 1

FUEL PRICES AND RISING ENERGY COSTS ARE A DRAIN ON THE GLOBAL ECONOMY “As the global economy expands, the emerging economies will demand more energy and cause prices to rise.” – CEO, MARITIME 81% of executives say uncertainty surrounding energy policies is hampering global economic recovery. 80% say that today’s relatively higher fuel costs $ $ $ $ $ are reducing global economic growth. Transportation executives believe the global economy is poised for a protracted period of increasing energy costs. 63% believe prices will increase over the next 18 months, 78% expect prices to increase over the next three years, and 69% believe prices will increase over the next five years – 38% say significantly. $$$$ $$$$$ $$$$ $$$$$ $$$$$$$$$ REGULATIONS FROM THE U.S., EU AND OTHER GOVERNMENTS ARE HURTING CONSUMERS 66% of respondents say government policies have driven energy prices higher. Efforts to combat perceived long-term climate change run counter to a near-term economic growth agenda. 83% agree that relatively high fuel prices are contributing to higher consumer costs. 81% agree that higher fuel prices are impacting consumer spending in other categories. REGULATORY ACTIVISM OVER EMISSIONS IS CAUSE FOR CONCERN 76% of transportation executives are concerned by current and proposed emissions regulations. 47% in turn say that the state of emissions regulation is contributing to higher energy costs – a figure that rises to 64% among trucking companies. Overall, 86% say such emissions regulations are adding to operating costs. Moreover, 79% say regulatory actions are forcing their companies to increase spending on capital equipment. 2 AUGUST 2013 IN ASSOCIATION WITH:

CARRIERS AND THEIR CUSTOMERS FORGE STRATEGIC RESPONSES… 47% of freight and passenger carriers in the airline, maritime, trucking and rail industries say their customers are working more closely with third-party logistics groups to optimize transportation costs. 35% say their customers are relocating production or warehousing for the same reason. Nonetheless, 31% say they see customers experiencing financial distress as a result of energy costs. 81% say they are updating their fleets to be more energy efficient. 79% say they are doing more to promote their sector’s energy efficiency relative to other transportation modes – rising to 89% among rail respondents. …AS DO MANUFACTURERS OF TRANSPORTATION EQUIPMENT 77% of manufacturers are working to develop vessels, trucks, rolling stock and aircraft that are more energy efficient. 64% are investing in new plants expressly for this purpose – 24% extensively. And 84% say they are working more closely with transportation companies to “engineer” greater transportation efficiency. OIL AND NATURAL GAS ARE THE MOST CRITICAL FUELS 94% of executives consider oil an important fuel for their company. 90% say the same of natural gas. The figures drop sharply for coal: only 55% use the fuel and only 34% extensively. However, 76% of rail respondents say coal is important, presumably reflecting its value as freight. Relative to smaller companies, the largest companies in the sample tend to assign significantly greater value to each energy source. AUGUST 2013 IN ASSOCIATION WITH: 3

ABOUT CIT ABOUT FORBES INSIGHTS Forbes Insights is the strategic research and Thought Leadership practice of Forbes Media, publisher of Forbes magazine and, whose combined media properties reach nearly 50 million business decision makers worldwide on a monthly basis. Taking advantage of a proprietary database of senior-level executives in the Forbes community, Forbes Insights conducts research on a host of topics of interest to C-level executives, senior marketing professionals, small business owners and those who aspire to positions of leadership, as well as providing deep insights into issues and trends surrounding wealth creation and wealth management. Bruce Rogers CHIEF INSIGHTS OFFICER Brenna Sniderman SENIOR DIRECTOR Kasia Moreno Founded in 1908, CIT (NYSE: CIT) is a bank holding company with more than $35 billion in financing and leasing assets. It provides financing and leasing capital and advisory services to its clients and their customers across more than 30 industries. CIT maintains leadership positions in small business and middle market lending, factoring, retail finance, aerospace, equipment and rail leasing, and vendor finance. CIT also operates CIT Bank (Member FDIC), its primary bank subsidiary, which, through its online bank, offers a suite of savings options designed to help customers achieve a range of financial goals. To subscribe to the CIT Perspectives Newsletter, please send an email to CONTACT US CIT PRESS INQUIRIES Curt Ritter Director of Corporate Communications Matt Klein Vice President, Media Relations EDITORIAL DIRECTOR Brian McLeod MANAGER, NORTH AMERICA Lawrence Bowden MANAGER, EMEA Curtis Bergh DEPUTY DIRECTOR, APAC CIT BUSINESS INQUIRIES Dan Infanti Senior Vice President, Marketing and Advertising David Fields Assistant Vice President, Marketing William Millar REPORT AUTHOR Charles Brucaliere DESIGNER IN ASSOCIATION WITH: 60 Fifth Avenue, New York, NY 10011 | 212.366.8890 |

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