As fuel costs rocket, is biofuel the answer the road transport industry needs?

7th September 2023

Haulage and courier service prices dip as greener fuels come into focus

The price-per-mile charged by haulage and courier vehicles is down 3.2% year-on-year, according to the latest data from TEG’s Road Transport Price Index. Prices also fell slightly month on month, dropping 0.25% throughout August.

Courier prices fell by 0.7% during August, ending the month 3.3% lower than they were in August 2022. Haulage prices saw a similar YoY drop of 3%, but increased month-on-month, following the reintroduction of the HGV levy and the return of rising fule prices. Fortunately, haulage prices only rose by a marginal 0.35%.

Sustained lower prices is good news for businesses that rely on road transport, but further price rises could be just around the corner as fuel costs surged by almost 10p this month. Many operators might now be giving new consideration to diesel alternatives.

The government has recently released its Biomass Strategy 2023, which sets out government policy for encouraging biofuel use for HGVs and other vehicles which are more difficult to electrify.

As the industry moves towards 2035 – and the phasing out of new diesel HGV sales – biofuel can provide a more affordable, more sustainable alternative to diesel. It could be a lifeline to operators already contending with high energy and business costs.

Efficiency can battle driver shortage

Although the industry has strived to attract more HGV drivers in recent years, it still has a problem with people leaving the workforce or retiring altogether. By 2026, around 30% of current truck drivers will be retired.

At the same time, not enough new, younger recruits are entering the industry.

Solving this problem depends partly upon offering more appealing working terms and conditions. But operating more efficiently will also help greatly, enabling businesses to function with fewer drivers and – ultimately – lower salary costs. This is one-way operators can mitigate the impact of rising fuel and business costs.

Lyall Cresswell, CEO of Transport Exchange Group, says:

“The release of the biofuel strategy is a promising development for alternative fuels, while some companies are even trialling solar-powered and kinetic energy-powered vehicles to fuel their fleets.

“All of this will help the road freight sector to achieve decarbonisation targets, particularly as battery electric vehicles alone don’t provide enough reliability and efficiency to meet consumer demands. Alternative fuels cost more, but long term, there are both cost and environmental benefits, especially when their use becomes more widespread.

“If there are more fuel price hikes in the coming months, we can expect more operators to explore alternative fuels. Road transport prices have dropped this month, but any upcoming fuel price increases might change that.”

Kirsten Tisdale, Director of Logistics Consultants Aricia Limited and Fellow of the Chartered Institute of Logistics & Transport, says:

“The recent retail headlines have been about price rises slowing – that’s slowing, not necessarily going down. But it’s a different story in road transport. Spot haulage rates have been actively dropping for some time now. Although the haulage element of the TEG index went up in August when compared in July, it’s always done that since the index started.

“The real story is that spot haulage rates have been showing year on year deflation for a full 15 months, and that courier rates have also continued the deflation they started to show recently. It will be really interesting to see the next Bank of England interest rate decision later this month.”