Take action on high fuel prices

The ATA has urged trucking businesses to take action on high fuel prices, with the price of diesel rising by about 20 cents per litre between January and early April.

The price of diesel in Australia is determined by the benchmark price of diesel in Singapore, which has gone up because of the political uncertainty in the Middle East.

When the last spike in diesel occurred in 2008, I remember getting an angry letter from a trucking operator who argued that setting fuel prices based on Singapore was unfair, because it was a city state that didn’t use much diesel.

It’s true that Singapore is small, but it’s also the region’s refining and distribution centre. It has three huge oil refineries: the ExxonMobil and SRC refineries on Jurong Island and the Shell refinery on Pulau Bukom.

Over 40 percent of Australia’s diesel is imported, mainly from these refineries, so our diesel price closely tracks the Singapore Gasoil 10ppm sulphur benchmark price when you add the cost of shipping and Australian taxes. It also has to be remembered that Australia’s diesel requires extensive processing at the refinery to meet our low sulphur standard.

Increase your freight rates or fuel surcharge
It’s vitally important to increase your freight rates or adjust your fuel surcharge as prices change.

The ATA urges trucking businesses to set their rates using the cost models or expert guidance provided by ATA member associations. These cost models enable you to calculate instantly your hourly and per kilometre costs for each truck, and then work out the rates you should charge to reach your profit goals. We can’t offer you advice on what your profit goals should be – that’s up to you.

There’s nothing harder than asking a customer for more money, particularly if you’ve dealt with them for years. They don’t like it, and may tell you they can always find someone to do the job more cheaply. “We don’t care how you do the job for the price,” they may say.

It may be better, under those circumstances, to look for other customers or other ways of using your equipment, rather than trying to do the same work for steadily declining margins.

And your customer might find themselves in trouble under chain of responsibility if they turn a blind eye to how a lower cost trucking business gets the job done. Under chain of responsibility, consignors and receivers can be prosecuted if they make demands on a trucking business that would end up with a driver having to speed or breach the fatigue laws.

Watch your costs and cash flow
The flip side of increasing your rates is to watch your costs and cash flow.

The first place to look at is your fuel consumption. Your ATA member association can again be a great help here, because many have alliances that provide discounts on the price of diesel.

Other options for reducing your fuel consumption include setting your speed limiters to 90 km/h rather than 100 km/h, if your schedules allow. Scania’s recent 90 km/h Fuel Duel showed that speed limiting at 90 km/h can achieve a fuel saving of about 6 percent for highway running. For one truck doing five runs between Sydney and Melbourne per week, the savings could amount to about $10,000 a year.

Investing in eco drive training for your drivers – or yourself – can also deliver substantial benefits. Eco driving is all about operating trucks smoothly to minimise fuel consumption. One study has shown that fuel savings of up to 27 percent are possible. Your savings are likely to be lower than this, but still worthwhile.

There are both online/classroom and on-road courses available. As you’d expect, the courses with an on-road component are more expensive, but research by Monash University suggests they deliver better results.

Register now for expert business advice
Delegates at the 2011 Australian Trucking Convention will get expert business advice from the lead transport and logistics partner at corporate advisory firm Ferrier Hodgson, Brendan Richards.

Brendan has provided advice to many transport companies, and was the receiver and manager of the Mannway Group of Companies. He will share his insights into the business strategies that work in our industry – and the ones that don’t.

The convention will be held at the National Convention Centre, Canberra, from 26-28 May.
To register, visit www.ataevents.net.au.

Stuart St Clair
Chief Executive

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