Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
If you're a trucker or private fleet manager looking for a predictably priced alternative source of fuel, truck maker Navistar International Corp. and natural gas advocate Clean Energy Fuels Corp. think they have a deal for you.
Ironically, how good that deal turns out to be will depend on doing one's best to predict the unpredictable.
In early February, Lisle, Ill.-based Navistar and Seal Beach, Calif.-based Clean Energy, cofounded by energy baron T. Boone Pickens, unveiled a joint program to provide incentives to truck owners, renters, and lessors to purchase new and more expensive vehicles powered by liquefied natural gas (LNG) or compressed natural gas (CNG), both of which are considered cheaper and more environmentally friendly than traditional diesel fuel.
Under the program, a user would agree to purchase a gas-powered vehicle manufactured by Navistar and then commit for five years to buying 1,000 gallons of natural gas per month. In return, Clean Energy would offer the user a $500 monthly rebate, which, over the five-year span, would offset the estimated $28,000 per-unit differential between buying a gas-powered truck and purchasing a new diesel-powered vehicle.
In addition, the user would pay for its natural gas fill-ups at a price 60 cents a gallon below the prevailing price of diesel fuel as calculated each week by the Department of Energy's Energy Information Administration (EIA). As of April 9, the national average price for a gallon of diesel fuel stood at $4.148, according to EIA data. Thus, a customer would pay $3.55 a gallon for the first 1,000 gallons consumed during the month.
Users who need to buy in quantities that exceed the 1,000-gallon threshold in any given month would be charged Clean Energy's "retail" rate, which currently stands a shade below $2.90 a gallon, the company said.
Big savings potential
Based on estimates that a typical solo long-haul driver logs 12,000 miles a month, the program could deliver monthly savings of $1,200 per month between the rebate and the savings at fill-up, according to the companies. LNG-powered vehicles can run about 400 miles on a full tank. Vehicles powered by heavier CNG wouldn't get the same range with a full trailerload. Such vehicles are better suited to shorter trips within urban areas where they return to the same depot each day.
For fleet owners and operators uninterested in participating in the program, the alternative would be to pay for the gas-powered vehicles out of pocket and fill up at the pump at prevailing prices for either LNG or CNG. Based on the stunningly wide differential between natural gas and crude oil prices, that option, at least for now, sounds like the better bang for the buck.
Natural gas futures contracts are today trading at $1.98 per million British thermal units (BTUs). Futures prices have fallen about 50 percent in the past 12 months due to a mild North American winter that depressed energy demand and an increase in domestic exploration and development that has led to an abundance of gas inventories. More than 80 percent of natural gas consumed in the United States is domestically produced. The balance is imported from Canada.
By contrast, West Texas Intermediate (WTI) oil futures prices, which are more influenced by global demand and by geopolitical factors, have hovered in the $103-a-barrel range for several months. Brené crude (a sweet, light crude oil), considered the world's benchmark, is trading at a 20 percent premium to WTI.
The current differential of "52 times" between market prices for natural gas and WTI oil is unprecedented; the ratio is historically between six and 12, according to Clean Energy. Many analysts believe the combination of factors that have already affected natural gas supply and demand could cause futures prices to fall even further in 2012 and beyond.
The market price for natural gas translates into a pump price of $2.50 a gallon for LNG and $2.25 for CNG.
Market uncertainties
James N. Harger, Clean Energy's chief marketing officer, said the company is marketing the service to companies skeptical that such a wide price gap between oil and natural gas will persist in the years ahead. From 1990 through 2012, natural gas futures prices averaged $4.01 per million BTU, reaching an all-time high of $15.35 in December 2005 in the wake of hurricanes Katrina and Rita that shut off natural gas supply flows along the Gulf Coast, and hitting a record low of $1.05 in January 1992.
Each $1 per million BTU increase in natural gas prices would equal a 14- to 15-cent per-gallon price hike at the pump, according to Clean Energy's estimates. Thus, a spike to levels midway between the historical high and low price ranges could significantly narrow the gap between oil and natural gas, and make the Navistar-Clean Energy initiative more attractive, Harger said.
Perhaps mindful of all the market uncertainties, Clean Energy said it would allow customers to opt out of the agreement at any time without penalties, Harger said.
Navistar spokesman Stephen C. Schrier said the company will in late summer unveil a gas-powered line of vehicles in the mid-sized category. It plans to roll out gas-powered trucks in the heavy-duty, or "Class 8," category sometime in 2013, he said.
The natural gas highway
The initiative is the latest effort by Pickens, who turns 84 next month, to wean the nation off of imported oil and to use more natural gas. Several years ago, Pickens proposed a plan to invest $1 trillion in wind farms that would eventually replace natural gas as a primary energy source. Natural gas supplies would then be freed up to power trucks and other heavy-duty equipment. The proposal has made little headway due to the logistical challenges in locating wind turbines in congested urban areas.
Clean Energy operates hundreds of natural gas fueling stations nationwide and has a strong presence among intra-city transit agencies and waste-hauling companies, both of which have vehicles that operate in local service and depart from and return to the same locations each day.
The company is building what it calls "America's Natural Gas Highway," a national network of truck refueling stations. Harger said the company expects to have 70 stations operational by year-end and another 80 built by the end of 2013. A high-density gas-refueling infrastructure is considered the key to a successful transition by truck fleets from petroleum to natural gas consumption.
At this point, no companies have signed up for the joint program. Jerry Moyes, CEO of Phoenix-based Swift Transportation Co., the nation's largest truckload carrier by sales, attended the Feb. 1 program launch event at Navistar's Lisle headquarters in Lisle. According to published reports, Moyes said Swift is testing 16 natural gas-powered trucks, and said the success of the program depends on the density of the refueling infrastructure.
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."