Fuel prices: worse to come

The Victorian Transport Association (VTA) has spoken out about the rising fuel prices and the impact this is having on transport companies.

VTA CEO, Philip Lovel said: “The transport industry is carrying the burden of these fuel prices and we need to ensure that transport operators are sharing this burden with their customers, or they will not survive.”

World oil reached a new record price above 120 US dollars a barrel on Tuesday as concerns over the United States economy continue. Oil prices on both sides of the Atlantic have nearly doubled in a year and have continued to soar since the benchmark New York contract broke through the 100 US dollar mark at the start of the year.

Philip Lovel said that the only positive is that the Australian Dollar is at record levels, and if it ever drops below 90 cents to US dollar we are all in trouble!

Supply jitters in Nigeria and geopolitical tension over Iran have added to the price surge. Nigeria has lost about half its oil output amid a strike and rebel attacks. A group of Nigerian militants attacked an oil ship off the coast of West Africa.

Problems continue in Iran, which said on Monday it would reject any offer that violates its right to the full nuclear fuel cycle after world powers said they had prepared a new package to end a long-running standoff over its nuclear programme. Oil players fear the ongoing tension could result in Iran using oil as a bargaining chip. Iran is the second-largest producer in the Organisation of the Petroleum Exporting Countries (OPEC) cartel.

Mr. Lovel said: “The daunting thing about the recent price rise is that there was no shortage of oil, no sudden embargo, no exporter turning off its spigot. Some attacks on pipelines in Nigeria was all it took. We are in a period of world uncertainty but as an industry we must survive. If the transport operators are not receiving a fuel levy from their customers then they are in trouble. Every company should have a fuel levy in place. The fuel levy is negotiated with customers, and there are also specific levies for sub-contractors.”

The VTA has information on price increases and can assist companies in setting up a monthly fuel levy which is a rise and fall paid one month in arrears. With this system no one loses. For example since May 2003:

• A 3 tonne truck fuel cost percentage has moved from 13% to 19% in the VTA cost model;

• An 8 tonne truck has moved from 13.45% to 19.22%; and

• A 12 tonne truck has increased from 10.95% to 18.01%.

This equates to thousands of dollars that a transport company cannot afford to cover to stay in business. If companies are not adjusting to this change then they are losing margins which they will find impossible to recover. The VTA appeals to all customers to work with their transport providers to agree on how they can adjust to this unprecedented change in fuel costs.

Mr. Lovel concluded: “We can’t have companies living in a false hope that the prices will go down to levels of five years ago. The price of crude is expected to hit US 200 dollars a barrel in the next two years. Trucks play an important role in our economy, and are the primary means of moving our freight and day to day goods. We need to ensure they can still operate effectively.”

What has happened with fuel prices?

Year 1 May – Diesel Cents Per Litre (CPL)

2001 96.81

2002 88.33

2003 92.90

2004 97.60

2005 116.61

2006 145.81

2007 124.22

2008 165.63

For further information on the VTA Fuel Levy please contact the VTA. We are able to work with transport companies and customers to develop individual fuel levies for your business.

VTA member survey

The VTA conducted an industrial relations survey in November 2007 and asked if members charge a fuel levy to customers. Of the 48 total responses, 13 stated they do not (27% of respondents). This figure indicates that many businesses are still not charging a Fuel Levy, despite the rising fuel costs and the impact on their business.


Industry calls for shadow toll

The transport industry has argued government should swiftly implement ‘shadow toll’, a funding scheme that allows a private contractor to recover costs from government based on road usage.

The concept has been proposed by the Royal Automobile Club of Victoria (RACV), as it put forward a $3.2 billion road infrastructure initiative, Outer Melbourne Connect.

The initiative details new road, rail and public transport projects, including 85 arterial road projects across outer Melbourne, suburbs needing new or expanded bus services, and level crossings requiring grade separation.

RACV public policy general manager Brian Negus said the State Government should first seek federal funding for the appropriate road and public transport projects before delivering the remainder of the backlog with an ongoing program of works through the private sector.

“These works could be built within about five years and paid for via ‘shadow tolls’, where a private contractor constructs road then recoups costs from government during a 20-30 year period based on vehicle usage of roads,” Mr Negus said.

“Let me make this crystal clear: a shadow toll is not an extra tax, in fact there would be no additional charge to motorists using these new roads.”

The plan is being backed by a transport collaboration, which comprises industry peak bodies including the Victorian Transport Association (VTA), Yarra Trams, Victorian Taxi Association and Victorian Motorcyclists Union.

VTA chief executive Philip Lovel said the State Government should waste no time embracing the ‘shadow toll’ funding concept.

“If the Government acts proactively, we could potentially complete 30 years worth of much needed infrastructure in as little as five years, providing a boost to road safety, the economy, employment market and productivity.

“We simply cannot afford another 20 years of drip feeding only a handful of improvements each year,” Mr Lovel said.

He said the collaboration now called on the State Government to support the plan and ensure the projects were delivered under the imminent Integrated Transport report.

He said the proposal would help the State and Federal governments achieve their goals to boost the economy and jobs via infrastructure spending.

Connect is an ideal vehicle to achieve this outcome; outer Melbournians are increasingly choosing to work closer to home, and many industries have relocated to the middle and outer suburbs to benefit from the ready land supply and growing workforce,” he said.

Sunday costs more on the docks

Swandon Dock at night.

Swanson Dock at night.

(Image courtesy of the Port of Melbourne)

Additional costs arising from stevedore DP World’s Sunday operations must be passed on in the transport chain, the Victorian Transport Association (VTA) has argued.

In July, DP World Melbourne announced its West Swanson Terminal would treat Sunday as a normal receival, delivery and storage day from October, in response to the significant increase in the number of vessel calls and congestion at the terminal particularly over weekends.

Under the new policy, Sunday will be included as part of the three days of availability for the delivery of imports and as an export receival day. Storage charges will also accrue for ‘time-up’ containers on a Sunday.

VTA CEO Philip Lovel said the issues of handling container trade volumes effectively at the terminal were yet to be resolved.

“We continue to have significant dialogue with DP World on the issues. It is appreciated that while on average some 30 per cent of container volumes are received into West Swanson Terminal from vessels over weekends, only some 11 per cent of containers are distributed through the stevedore’s gate on a weekend,” Mr Lovel said.

“We also continue to work with transport companies to encourage greater uptake of vehicle booking slots at night and over weekends.

“This is having an effect, with more volumes moved by road in the Port of Melbourne during night-shifts and on weekends than in any other major capital city port in Australia,” he said.

However, he said additional costs were unavoidable because of the limited importer and exporter operating hours on weekends as well as very limited opportunities to de-hire empty containers on weekends, leading to further staging added costs.

He added that Customs’ container examination facility and some of the AQIS external wash facilities were shut on Sundays.

“The immediate practical outcome of DP World’s Sunday operations policy will be added costs in the landside logistics task ‘downstream’ from the stevedore’s gate, and increased terminal storage costs as containers become ‘time up’ on a Sunday,” Mr Lovel said.

“We have urged all road transport operators engaged in container transport to ensure that the added costs of transit operations and the additional costs of moving towards 24/7 operations must be borne by the end-use of their services – importers, exporters and freight forwarders.”

He said the container transport sector should push harder to solve the mismatch of operating hours across its chain to effectively cope with continuing container growth.

“Studies all point to the need for parties in the container transport chain to consider the ramifications of their existing operational practices against the realities of continued strong container trade growth and the pressures of 24/7 operations at the ocean terminal interface,” Mr Lovel said.

Transport think tank meets

The Victoria Transport Association’s (VTA) Industry Think Tank has held its first meeting to set priorities for the freight sector.

VTA president Paul Freestone said: “Whilst there is no silver bullet, it is the little things that add up. As an industry, we recognise the need to raise our profile in advocating the case for change.

“Now is the time to clearly articulate the issues, outline the opportunities that can be acted upon quickly, and do it.”

The Industry Think Tank was established to provide a focus for the sector in generating ideas and actions that can immediately improve the sector.

Revolving around the urban freight task, the meeting has suggested low-cost options including sequencing of traffic lights, re-marking of lanes, implementing clearways during peak hours and the introduction of high productivity vehicles.

The meeting also brought up longer term issues such as completing the Melbourne road network, improving intermodal freight linkages and a prioritised list of infrastructure projects. 

VTA CEO and chairman of the Think Tank Philip Lovel said as the freight industry came to face an unprecedented challenge with cost increases, a collaborative approach was essential to find innovated solutions.

“The cost of moving goods is going through the roof. In the past the freight sector could achieve efficiencies that meant the consumers were insulated. These opportunities have dried up, and the public is about to experience some real price increased because of these cost rises,” Mr Lovel said.

“We need to get together to find new ways of doing business, and to take more cost out of moving goods. Otherwise, the public will simply pay more, and jobs will be lost in the community.”

Also proposed at the meeting were a number of trials and case studies to “give freight a go”, including after hours access trials to local businesses, a 24/7 taskforce to demonstrate the benefits of wider access, high productivity vehicle trials and a rail efficiencies summit to map an action strategy.

“The Industry Think Tank will pursue these issues to achieve some immediate wins and to advocate future change,” Mr Lovel said.

“We have to take a positive attitude to meeting the future freight task. It’s better to find mutually acceptable innovative solutions, rather than adopting a negative attitude that things can’t be done.”

Road industry think-tank to solve cost crisis

The Victorian Transport Association (VTA), chief executive, Philip Lovel, has announced that “As a result of the never-ending costs increases that are burdening the freight and logistics industry, the VTA is setting up an industry think-tank.”

The freight and logistics industry is going through the toughest times ever known, with many long-time industry stalwarts saying that cost increases will bring many companies down. The Victorian transport and logistics industry is one of the state’s largest sectors, employing more than 330,000 people and contributing more than 14 per cent of the state’s gross state product.

The VTA Industry Think-Tank aims to address a multitude of issues impacting on industry viability, such as:

• Customer demands.

• Cash flow / inventory costs.

• Compliance costs.

• Reduction in sub-contractors.

• Fuel Prices.

• Environment issues and carbon offsets.

• Interest rates.

• Plus many more.

Mr. Lovel said: “We don’t think either the politicians or the community in general understand the increasing burdens on the industry. Whilst they argue in Canberra about miscellaneous political issues, many companies are going to the wall. It is about time the politicians faced reality.

"We aim to work together to seek out opportunities for the industry. There are many things we can do together, to support each other and change the way we do business. This is our future, we have many talented people in our industry and we aim to use them.”

The VTA Industry Think Tank will address the issues above by working on the following:

• Develop new technologies for fuel savings, including higher productivity vehicles.

• Work on alternative fuels and taxation changes.

• Look at opportunities for bulk buying, especially fuels and oils.

• Lobbying with other industry organizations to achieve more influence at State and Federal level.

• Work with all our major customers to restructure delivery services and current operating restrictions.

• Work with the State Government to reduce Congestion (increase clearway times).

Mr. Lovel said: “If we all sit back and suffer then our businesses, Victorian community and Australia will suffer in general. We know the freight and logistics industry is the backbone of this country – it’s about time everyone pulled together. That’s what we are going to do, get on with it, get positive and change the way we do business.”

The VTA is now inviting specific industry and supplier representatives to the first Industry Think Tank session early in July. Visit www.vta.com.au.

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