What Do Creeping Fuel Prices Mean to the Haulage Industry?

Rising diesel prices

The price of unleaded petrol and diesel rose again in September, and diesel is now at its highest level since August 2015 – with East Anglia being particularly hard hit.

The biggest variable affecting UK fuel prices is the price of a barrel of oil, which during the course of September rose by 8%. The other major factor affecting fuel prices in recent weeks has been the falling value of the pound.

RAC fuel spokesman Simon Williams said: “Recent reports that OPEC – the organisation responsible for producing 40% of the world’s oil – has agreed there is to be a cut in oil production is having the effect of nudging oil prices up closer to the $50-a-barrel mark.” He added: “A higher oil price, combined with a weakening pound, is forcing up wholesale fuel prices: the wholesale price of diesel is now nearly 9p higher than it was at the start of August, and petrol 7.4p higher. The effect of this to date has been gradually rising pump prices.”

More Bad News for Hauliers

In addition to this, there are fears of a fuel duty increase in the Chancellor’s autumn statement, due on 23rd November. And it’s not just the cost of fuel that is impacted by the weaker pound; truck manufacturers are also warning of a sharp increase in vehicle prices next year if sterling remains low.

Any increase in fuel prices has a direct and unavoidable impact on the haulage industry. The question for hauliers is, what can we do about it?

There seem to be two main options: carry the cost; or pass it on. As far as carrying the cost goes, profit margins are already squeezed, leaving little room for further cuts. So can it be passed on? The Road Haulage Association (RHA) has already warned that road haulage costs are likely to increase as a result of currency movements since the EU referendum; passing on additional costs due to the increase in fuel price may be seen as risky.

Hauliers are already under pressure from customers to drive prices down and increased competition means there are plenty of options to take business elsewhere.

Can Alternative Fuels Ease the Pain?

A possible third option would be for the haulage industry to pursue alternative fuels aggressively and proactively. We recently considered what the fuel of the future might be … and it seems the future might be here sooner then we’d expected!

Switching to an alternative fuel won’t allow hauliers to sidestep any increase in the cost of vehicles caused by the weaker pound – but whatever the fuel used, they’ll have that to deal with anyway. Switching might just be the way to achieve competitive advantage, however; and since we can’t influence the price of oil or the value of the pound, maybe we can leverage alternative fuels to offset the impact they have?

As always, we’d love to hear your views on this, so please drop us a line or find us on Facebook and LinkedIn.