Fuel prices have increased rapidly in the UK over the last year, with petrol currently costing around 177p per litre and diesel costing around 185p a litre at the pumps. There is also speculation that petrol and diesel could reach £2 a litre this summer.
What factors impact fuel prices?
2 of the key factors which impact fuel prices are
- The price of crude oil
- The dollar exchange rate
In recent months the price of crude oil has jumped significantly in response to the Russian invasion of Ukraine. It had already been increasing due to the impacts of the COVID-19 pandemic.
Fuel retailers also influence the price of fuel – competition can see prices cut. But some retailers are also criticised for not passing on reductions at the pump when oil prices fall. Likewise, it has been reported that not all retailers are passing on the 5p cut to fuel duty that was introduced in March by the government.
There have also been changes to the rules relating to the use of red diesel, which will be having an impact on a range of businesses.
The impact of taxation on fuel prices
Tax makes up a significant amount of the cost of fuel – between fuel duty and VAT.
- 35% fuel duty
- 17% VAT
As mentioned above, a 5p cut to fuel duty was announced in March, but this has all but disappeared now that prices have risen again.
The RHA is calling on the government to put in place an ‘essential user’ rebate which would see fuel duty returned to them (think hauliers, coach operators etc). If put in place the RHA states it would enable operators to reduce their costs & lower their prices to customers. But it remains to be seen if this will be introduced.
At Anthony Jones we support these calls for action to be taken to help businesses manage their costs at this difficult time. Spiralling business costs can lead businesses to cut back on other essentials such as their insurance coverage, which can have a detrimental impact not just on businesses but on many aspects of society.
Fuel price projections 2022/23
Given the all-time high of fuel prices, it is inevitable that your business will be concerned about the cost of fuel in the coming 24 months. Will it stay as high as it is or is it expected to drop?
There is a lot of uncertainty over fuel prices given the current circumstances across the world.
This BBC article considers the fact that if countries across the world are phasing out certain suppliers of oil and gas, then this will have a significant impact on global supplies. And therefore costs.
So, we may expect fuel prices to remain higher than we have previously been used to for a sustained period.
It is likely that hauliers who buy fuel on the futures market will also see continued cost pressures – whilst prices here remain lower they are still trending upwards.
How can your fleet manage the impact of fuel prices?
We understand that the cost of fuel prices will be of concern to your business, whatever industry that you work in. And there will be limited options available to you when it comes to controlling the costs of the fuel that you must buy.
However, you may be able to take some steps to manage costs relating to other areas of your business.
For fleet operators, this can range from
- monitoring your fleet mileage and taking steps to manage this wherever possible to increase efficiencies
- minimising fleet downtime
- ensuring that your vehicles are well maintained and set up to maximise fuel efficiency
- engaging in driver training to encourage drivers to drive in a manner which promotes fuel efficiency – telematics & gamification apps can be beneficial tools in this instance
- With fuel prices at an all-time high, we may see hauliers using fuel escalator clauses in contracts held with customers to offer variable pricing to customers to minimise cost fluctuations
Longer term you will also want to be considering steps you can take to convert to greener forms of energy as and when the opportunity arises.
We recently blogged about ways in which small businesses can look to manage other energy costs where prices are also rising – some of which you may find useful.
Anthony Jones specialises in Fleet Insurance. Working with a wide range of insurers means we are well placed to get you not only the right insurance for your business, but insurance that offers value for money. We can also advise on areas such as risk management and strategy – areas which can really help you drive efficiencies and cost savings. Chat to us today for more information.