How fuel price increases have affected the road freight industry

20th April 2022

Since the beginning of the year fuel prices have risen to record highs with the average price of petrol at 167.30 per litre and diesel hitting 179.90.

If you are lucky enough to use your vehicle only for leisure or the occasional journey, it’s easy to make the decision to travel less, therefore reducing your fuel bill, but this isn’t an option for the road freight industry.

The challenges faced by the road freight industry

The last few years has been challenging for the road freight industry with Brexit, the driver shortage, fuel price increases, the war in the Ukraine and Covid-19 all taking their toll and contributing to the increase in demand and costs.

We recently reported that the average price-per-mile for haulage vehicles increased from 100.6 to 112.2 points between March 2021 and March 2022.[1] This increase has been consistent for 14 months and is unlikely to drop to pre-2020 levels any time soon.

The UK government have made a couple of changes in order to aid the road haulage industry, but this is not enough to counter all the challenges it is facing.

One of the most impactful changes was the cabotage rules being temporarily relaxed meaning that international drivers could make unlimited deliveries within a 14-day period as a means of helping with the driver shortage.

This relaxation was useful as it provided more potential road journeys and as cabotage loads were priced lower than normal loads, they were cheaper. In May 2022 this ruling is going to revert back to international drivers only being able to make two journeys in a 14-day period. When this reverts back, not only will the number of cabotage loads be reduced but the general costs will increase as well.

With road transportation accounting for 77.4% of all goods moved in the UK,[2] these challenges are going to have a massive impact on the road haulage industry, but also on all the other services, industries and retail which uses road haulage as part of their supply chain.

The impact of fuel rises on road freight

With a third of running costs in the road haulage industry being fuel, there is very little that can be done to reduce costs in this area. The cost of road haulage in the UK rose by 15% in January 2022, and this cost will get passed down the supply chain.

Whilst it is possible for freight industries to absorb some of the costs, as fuel prices have been increasing continually, it is no longer feasible for businesses to keep taking the hit. There is little choice but to pass the increase to their clients, who then pass the increase onto their clients adding to the inflation rises which are the highest in the UK since the 1990s.

In situations like this freight companies are left with three choices in the light of the crippling fuel rises: run at a loss, pass the rising costs to their customers, or find alternative means of cutting costs.

This provides an opportunity for freight businesses to streamline all aspects of their business model to ensure that it is running efficiently, but it will reach a point where the margins are so tight there are no further savings to be made.

The road haulage industry is an essential part of the UK economy as without it most supply chains would collapse, so it is essential that we keep going. One of the ways you can streamline your business is through the Transport Exchange Group, which can help you to automate manual processes and combine data to enable you to manage your suppliers and drivers. For more information give our team a call today.

[1] https://transportexchangegroup.com/road-transport-price-index/

[2] Department of Transport https://www.gov.uk/government/statistics/road-freight-statistics-2020