The emergence of rural transport strategies in response to rising fuel costs

Abstract

Rising and sometimes volatile fuel prices pose a challenge for rural organizations reliant on long distance transport. To understand the coping mechanisms used by such organizations, we survey rural business strategies in Israel, where fuel prices are high and urban development is concentrated in the country's geographic center. The businesses surveyed are operated by kibbutzim, historically collective communities that are now in various stages of privatization. Analysis of the ‘transport strategies’ employed by nearly 100 organizations in three regions of varying remoteness and isolation shows that firms rely on distinct strategies such as localization and high value density. Localization was found to be prevalent in all regions, as it requires little capital investment. Strategies exploiting high value density, including information-based services, were prevalent in remote and isolated regions where sensitivity to transport costs is acute. Non-remote firms were less inclined toward strategic adaptation, preferring non-disruptive changes such as cheaper shipping modes. The development implications of these transport strategies are consistent with rural economic trends observed throughout the developed world. If transport costs continue to rise, rural firms may shrink the radius of their sales and labor pools, or search for more lucrative products to reduce their relative transport costs.