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When fuel costs point to a new direction
Read time: 3 mins Added date: 26/01/2024
It’s not just hauliers and taxis who take the hit from petrol and diesel price hikes: the impact feeds through to every business. But smart tactics can help to ease the pain.
For drivers, rising figures at the pump were among the first signs of the elevated cost of living. The oil market prices that drive transport costs may have dipped from the record highs that followed Russia’s invasion of Ukraine, but they remain volatile.
Following four months of continual price hikes, in October 2023 the cost of filling up a diesel vehicle dipped by a penny per litre, and petrol dropped by 2p. However, consumer bodies such as the RAC claim prices remain inflated and unfair to consumers. Fuel costs remain a blow to business owners’, who are forced to decide between cutting journeys or passing this expense on to their customers.
For one haulier, the cost of filling an articulated truck has leapt from £40,000 a year to £60,000. Soaring diesel prices are piling pressure onto an industry already struggling with recruitment gaps. But the effects of fuel price increases don’t stop with haulage drivers.
A wide impact
Few sectors are immune as fuel prices are passed on from transporters to the businesses they serve.
Food and drink businesses are faced with huge cost increases across energy and transport.
In construction, fuel prices are pushing up the cost of development. The sector is already having to adapt to the end of the rebate on ‘red’ diesel – used for certain types of plant and machinery – a move intended to promote the adoption of more sustainable fuels.
Bus, coach and taxi firms are feeling the pinch too. In some areas of the country, operators have turned down contracts because fuel costs make them unviable, while transport providers face large upfront costs in moving to electric fleets. Further, staff shortages – many of whom were from the EU – mean that, post Brexit, attracting and keeping employees is more costly.
Given these factors, it is perhaps unsurprising that the demand for goods transported across Europe fell in the first half of the year. A disparity in fuel cost has also opened up between rural and urban drivers. Drivers in rural areas are paying, on average, between 10p and 15p a litre more for supermarket petrol.
Routes to efficiency
What could ease the burden?
Many businesses are working hard to make road transport more efficient. For example, combining multiple orders into one delivery and enhancing communication with customers to cut down the number of failed deliveries.
In-cab monitoring now enables transport firms to reward drivers for using fuel-efficient driving techniques.
Reviewing transport and logistics arrangements – for instance, by storing items closer to their ultimate location, or shipping more items less frequently – can provide long-term benefits.
Optimising routes to group local visits together can allow home care workers, for example, to cover less ground and use less fuel on their rounds.
Cut costs, cut carbon
By reducing road mileage, these kinds of efficiencies often have genuine sustainability benefits, supporting Net Zero carbon strategies. Some businesses are rethinking their models around this theme.
Rebellion Brewery in Berkshire, for example, has shrunk the radius of its customer deliveries from 70 miles to 30. Not only is this less expensive and more environmentally friendly: it’s also a taste boon for customers, since real ale should ideally be consumed as soon as possible after brewing.
Of course, not every business model is adaptable in this way. For many, an obvious solution is moving to more environmentally friendly vehicles – from e-cargo bikes to electric cars. If capital can be found, the payback for such a switch can be surprisingly fast.
In the immediate term, while acute pressures continue, the ability to pass on increased fuel costs to customers can be critical to survival. It’s a difficult move, but presenting any increase openly, with a clear and direct explanation, can help to keep customers on side.
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