Tuesday, February 22, 2011

Why isTunisia, Egypt, Bahrain, and Especially Libya Bad for the Postal Service?

The answer is oil.   Since the fiscal year began crude oil has incresaed $16 per barrel.  This is a 20% increase in price since the fiscal year began.  News reports suggest that gasoline prices could hit $5 a gallon this summer if the turmoil in Libya and other Middle East ountries  continues.   The increase in oil prices raise the cost of fuel used to transport and deliver the mail and heat and run the processing plants and retail locations.

Private sector competitors will handle incleasing oil prices by raising fuel surcharges, while at the same time working feverishly to minimize transportation and other fuel dependent costs.   The Postal Service will handle the increase by generating larger losses, even after it completes efforts to reduce excess capacity in its processing and transportation network.    Figuring out which approach makes more business sense is another issue for Congress to contemplate

1 comment:

Heather said...

It all depends on the current administration and its handling of the Middle East crisis because if we fail to maintain good relationships we have with a few countries in the region then the impact of the oil crisis on our economy will be damaging.