Plunging fuel prices are emerging as a rare bright spot for logistics companies, which have struggled recently with weak demand.  A gallon of diesel costs $2.34 in the U.S., a six-year low and down about 30% from the same time last year, according to the U.S. Energy Information Administration. The price of bunker fuel, which powers engines on container ships, is down about half from a year ago, according to Bunker World.  Transportation firms generally pass along much of their fuel savings to shippers. But the steep decline in energy costs is providing relief at a time when meager global economic growth is holding down freight volumes. Many trucking companies, airlines and shipping lines have been forced to cut their prices to hold onto customers, and lower fuel prices help soften that blow, analysts say.  “The ongoing decline in the cost of fuel has effectively lowered the cost of operations for all modes of transport, which allows marginal operators to continue where they would have otherwise failed, and allowing better operators to thrive,” says Donald Broughton, an analyst with Avondale Partners.  Ultra-cheap fuel is a particularly welcome development for ocean carriers. Global container-shipping rates are down by more than 47% since the beginning of 2014, according to Drewry Shipping Consultants Ltd., as big shipping lines contend with massive overcapacity and weaker-than-expected demand.  Maersk Line, the world’s largest container ship operator and a division of A.P. Moeller-Maersk AMKBY -3.05 % A/S, said in its third-quarter financial results that its average rate fell by 19.2% compared with the same quarter in 2014, while bunker costs fell by 41.5%. The disparity boosted quarterly profits by $264 million.  The industry as a whole will likely earn about $5 billion in profits this year, largely thanks to low fuel prices, said Simon Heaney, a Drewry analyst. Shipping lines lost $19 billion in 2009, when the financial crisis sparked the sector’s last downturn.  “Fuel prices have propped them up,” Mr. Heaney said.  For trucking companies, falling oil prices can be a double-edged sword. Most truckers charge customers a fuel surcharge on top of their base shipping costs. When diesel prices fall, it lowers costs, but also revenues.  At the same time, overcapacity and weak demand for over-the-road shipping services have depressed freight rates for trucks. Spot rates for long-haul big rigs carrying dry goods, flatbeds and refrigerated trucks have all fallen by between 16% and 18% in the last year, according to freight brokerage DAT Solutions.  Jacob Eberhart, whose family-run private equity firm owns three trucking companies, said that while the cost of operating his tractor-trailers has fallen about 10% in the last year, fuel surcharges have fallen faster. Demand for trucking services has not picked up as much as he expected, muddying the math for his trucking operations.  In some cases, Mr. Eberhart’s companies have tried to raise freight rates to fill the gap. A year ago, for example, Poling Express, one of Eberhart’s companies, charged $2 per mile to ship a truckload of frozen turkeys 1,700 miles from Minneapolis to Oregon -- $1.50 for the freight, plus a $0.50 fuel surcharge. Today, the same load ships for $1.79 – $1.55 for the freight, $0.24 for the surcharge. He said he raises freight rates sparingly and infrequently to avoid upsetting customers.  “Generally, when oil prices go down, and fuel surcharges go down, and we see an uptick in business,” Mr. Eberhart said. This year, the uptick in business is “nowhere near” past years, he said, because of tepid demand for food shipments around the holiday season. “Whatever is causing the economy to remain slow is damping what would otherwise be a strong season.”  C.H. Robinson Worldwide Inc. CHRW -3.34 % and Werner Enterprises, WERN -8.02 % Inc., both recorded declines in revenue in the third quarter due to reduced fuel surcharges. “The decrease was driven by lower rates charged to our customers, primarily due to the lower cost of fuel,” C.H. Robinson wrote in its third-quarter earnings report in November. Yet both companies produced a higher profits in the third quarter compared to a year earlier.  Write to Robbie Whelan at robbie.whelan@wsj.com
A sharp drop in the price of oil is lowering fuel costs for container shipping lines, trucking companies and other transportation providers, a welcome development as they struggle with weak demand.