Latest TEG Road Transport Index out now
7th September 2023
The combined haulage and courier price falls by 0.25%, as under-strain operators feel the pinch at the pumps and alternative fuels come to the fore
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The latest data from the TEG Road Transport Price Index shows the overall price for haulage and courier services is currently 119.4, down slightly from 119.7 in July and 122.3 in June. Year-on-year, the overall August price is down 3.2%.
During the course of August, courier prices dropped -0.7%. But year on year, there’s a more marked fall of 3.3%.
Haulage prices have started to rise again this month – but only by 0.35%. Year on year, prices decreased by 3%, mirroring the annual courier price fall.
There are various factors pushing costs up for operators, not least of all the hike in fuel prices. The return of the HGV levy and the ongoing driver shortage are having the same effect.
However, developments in green fuel are encouraging, particularly for operators transforming their fleets or planning to do so. And for companies that aren’t yet thinking about more sustainable fleets, rising fuel costs and rising alternative fuel viability might just give them reasons to reconsider their stance.
After months of continually falling fuel prices, August brought back price rises at the pumps. Both diesel and petrol prices increased by almost 6p per litre. Whilst the index tracks the average price of diesel and petrol each month, prices rose as high as 150.73 and 153.52 pence per litre respectively in the final week of August.
This is driven by oil-producing countries’ determination to limit the supply of oil and achieve higher prices. Saudi Arabia, for instance, is now releasing less oil to market than at any time in the last two years. The Saudi energy ministry said that cuts in production could be ‘extended and deepened’, which won’t bring any solace to the road transport industry.
However, with the Chinese economy slowing down, there could be significant hits to demand for oil. This would, in turn, bring prices back down again.
One thing for certain is that petrol and diesel prices are now under greater scrutiny, and supermarkets are being watched more closely for signs of profiteering.
On 10 August, the government revealed its long-awaited Biomass Strategy 2023. It backs biofuel as an alternative fuel source for HGVs and other vehicles that are more challenging to electrify. The strategy outlines what the government is doing so that biofuel can play a major role in the UK reaching net-zero emissions by 2050.
Of course, as part of net zero targets, emission-producing HGVs will no longer be available to purchase by 2035. Former MAN Truck and Bus chief executive Des Evans recently expressed doubts that the industry is ready for 2035. He claimed that many operators will replace their existing fleets as that date nears and then use CO2-generating vehicles for as long as possible.
But if vehicles can be powered with biofuel, that’s a more sustainable way to run them since UK biofuel is predominantly made from used cooking oil, waste food, slurry and other waste products. As a result, biofuel can help operators to run greener fleets until they can electrify them.
Biofuel can also contribute to the UK’s energy security if it’s produced domestically and sustainably. Currently, the UK creates around 65% of its biofuel supply.
However, the government has recently been accused of ditching green pledges in the wake of their opposition to ULEZ. So it remains to be seen how much support the government will give to biofuel in practice.
When it comes to powering vehicles, hydrogen fuel cells are even greener than biofuel. They only emit water and heat.
The technology has yet to fully take off – with just 15 filling stations in the UK – but there are promising developments. In the second half of the year, several parcel delivery companies will be trialling First Hydrogen’s hydrogen fuel cell vehicles.
Although HGVs are the big polluters on the road, courier companies also have a responsibility to reduce their emissions. Hydrogen fuel cell vehicles can travel hundreds and hundreds of miles on a single tank, appealing to both hauliers and couriers. For an industry that relies upon finding efficiencies, these vehicles could prove more efficient and reliable than electric vehicles. At the very least, hydrogen could play a significant role in reaching net zero targets.
But perfecting the technology for real commercial use will take some time, as will introducing hydrogen fuel fleets. So, any related cost savings won’t be coming anytime soon – for couriers or their customers.
Another reason for truckers to go green is the HGV levy.
Since it only came back into force at the beginning of August, we’re yet to see its full effects on road transport prices. Some green campaigning groups are calling for distance-based charging – rather than the current day-based system – which would change how it impacts operators.
However, since only zero-emission vehicles are exempt, all kinds of operators will feel its effect in the coming months. For them, it only adds more urgency to sustainability efforts.
And, of course, it adds to already-weighty costs.
No matter how sustainable vehicles are, they all need drivers.
Throughout most of 2022 and well into 2023, the number of HGV drivers on the road hasn’t moved much. Yes, those numbers have remained stable for a fourth successive quarter, but the underlying concerns remain the same.
There’s a timebomb waiting to go off: soon-to-retire drivers aren’t being replaced by younger recruits.
Operators can partly mitigate this threat by working smartly and becoming more efficient, but that’s not a long-term solution.
Coupled with the cost of living crisis, the driver shortage is putting pressure on operators to offer high salaries – and pass costs on to customers. After all, HGV driver salaries alone have increased by around 30% in the last two years.
Even as biofuel fuel receives new backing and developments in hydrogen fuel use take shape, rising fuel prices will be a cause for concern. Along with continued driver shortages and the return of the HGV levy, increasing diesel costs could mean haulage and courier price drops are short-lived.
And, of course, those operators who opt to introduce greener fleets – perhaps to avoid rising fuel costs – will need to invest significant sums.
All in all, it’s an exciting time as the industry looks forward to opportunities that could bring greater sustainability and efficiency. Now, it will hope it gets the support required to grasp those opportunities.