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.


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