Expeditors International of Washington (EXPD) investor relations material

Energy market disruptions and outlook

• Ongoing Iran conflict has caused major disruptions in energy supply, leading to spikes in crude and transportation fuel prices, with normalization expected to take 3–6 months even in best-case scenarios.

• Physical oil markets are under severe stress, with a significant spread between Dated Brent and futures, indicating difficulty in obtaining spot barrels.

• Natural gas production, especially in Qatar, may take 1–2 years to recover, prolonging market instability.

• Freight rates in affected lanes have surged 100–200%, with long-term rates likely to remain 10–20% above pre-crisis levels.

• Fuel surcharges have risen sharply, with a slow decline expected as prices normalize, due to a lagging half-life effect.

Long-term risk and policy shifts

• Futures markets now price in a structural risk premium for oil and jet fuel, reflecting the possibility of recurring disruptions in the Strait of Hormuz.

• Sustainable aviation fuel mandates are expected to create additional supply challenges by 2030–2032, further supporting higher long-term prices.

• Energy security is becoming the dominant policy focus for the US, Europe, and China, with the US leaning into fossil fuels and infrastructure, Europe accelerating domestic renewables, and China pursuing supply chain dominance in renewables.

Supply chain and cost management strategies

• Clients face 30–100% increases in air fuel surcharges and emergency bunker surcharges for ocean freight, with high volatility and uncertainty in future costs.

• Digital twin modeling is used to assess immediate and projected impacts, refine predictions, and identify mitigation strategies such as shipment consolidation and mode optimization.

• Continuous model refresh allows for real-time adjustment to evolving market conditions and cost structures.