How rising fuel costs affect the freight industry

Fuel costs in the U.K. continue to rise in the U.K., with the price of diesel currently averaging 155.23ppl – up from 128.20ppl in March 2021.

Contrary to rumours that sanctions on Russia are directly interrupting supplies to the U.K., fuel costs are increasing across the globe as crude oil becomes more expensive on the international market in response to the expected struggle to resource enough fuel in the event that Russia stops exporting to the EU and other countries. The price Brent Crude Oil has risen approximately 18% since the start of March and is nearly double what it was in March 2021.

But, how much further are fuel costs expected to rise, and how does this affect the U.K. freight industry?

Fuel prices are expected to increase to at least 175ppl but could top 200ppl

With Russia being the 2nd largest exporter of fuel, further restrictions of trade will affect the global market further. Although the U.K. only gets approximately 4% of it’s fuel from Russian sources, it is expected that our supplies will get more expensive as the gap in other countries’ supply chains are affected.

Increases in fuel costs are compounded by VAT and duty as well, which are added to the base value for the fuel.

For example, tariff code 2710 2090 00 has 2% duty, 67.67ppl excise duty, and 20% VAT applied to all imports.

Although the excise remains consistent, a rise in 30ppl on the cost of import adds another 0.6p in duty and 6p in VAT, so the total rise is 36.6p. This is before the importer (or any other sellers in the chain) add their margins.

In addition to crude oil prices increasing, the pound GBP has been weakening against the dollar USD over the last week. If this continues, U.S. bought fuels will be more expensive for U.K. importers to purchase, which will compound rising fuel costs further. 

The effects of rising fuel costs on haulage companies

Haulage companies usually operate vehicles 5 days a week, most weeks of the year. They use a large volume of fuel for every vehicle, and can be operating a whole fleet of vehicles. This means that fluctuations in the pence-per-litre for fuel can affect a haulage company’s profits significantly.

For example: consider that a company uses 150,000 litres of fuel every month, on average, and the pence-per-litre increases by 30p at the pump.

150,000 x 30p = 4500000p

4500000p = £45,000 off of the haulage company’s profit. 

Absorbing this cost is not viable for the haulage company, so costs have to be passed onto their customers. In fact, many already have daily, weekly, or monthly fuel surcharges (FSCs) in place to keep the passing of fuel costs at a fair rate for customers.

The effects of increased fuel prices on shippers


Vessel owners and operators need to fuel their ships during transit, in a process known as bunkering. With fuel prices increasing around the globe, a more expensive bunkering bill is unavoidable for most shipping companies.

This additional cost will be passed on to shippers, increasing the cost of freight, which is already high following the equipment displacement during the global lockdown fluctuations caused by COVID.

The end result is higher costs for consumers

As hauliers and shippers look to pass on costs to traders, traders will add the margins to their products. Ultimately, consumers will pay more at the end of the chain.
If you’d like advice on how rising fuel costs will impact your supply chain or customs clearancescontact one of our team today.
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