The International Road Transport Union (IRU) is calling for urgent government action on rising commercial road transport fuel prices, including capping fuel prices and cutting fuel taxation, to avert a wider economic crisis.
Commercial goods and passenger transport operators in all regions report a bleak picture in terms of soaring fuel prices, as outlined by IRU members meeting earlier this week in Brussels.
IRU is calling for urgent action to cap fuel prices for commercial road transport and reduce or rebate taxes and excise on fuel for commercial operators.
Global oil prices are reaching their highest level since 2008 and are set to climb higher amid continuing instability and sanctions related to the Ukraine conflict.
Average diesel prices, including taxes and excise, across the 51 countries in all regions that IRU tracks on a weekly basis, have risen by 33 percent over the past 12 months. With wafer-thin margins, operators must pass on cost increases to users or risk bankruptcy and further pressure on transport networks.
Radu Dinescu, IRU president, said: “Commercial road transport operators are struggling with rapidly escalating fuel prices. Some are already on the verge of bankruptcy, but if road transport does not work properly, already stretched supply chains will be affected even more. The biggest losers will be operators’ clients, the ordinary citizens and businesses who will suffer if commercial road transport costs spiral out of control.”
Compounded by ongoing post-pandemic pressure on global supply chains and mounting inflation, commercial road transport cost increases are already seriously affecting communities and businesses all over the world.
Many of those spoken to by HLPFI have raised this issue. Prices are on the rise across the project logistics sector. Staffing, covid-related disruption, fuel costs, among others, are forcing shipping lines, forwarders and other service providers to increase their costs to maintain margins. Everybody is feeling the force of inflation. If clients continue to demand the high standards from service providers, and for them to shoulder significant risks, the margins must be fair and prices must go up.
Rate increases have been well documented among the shipping lines, which as of now hold the key to the castle. The heavy transport engineering/crane service sectors are also feeling the effect of rising costs, but this segment is, in many ways, more difficult to assess.
This side of the project logistics supply chain is to some extent more fragmented – different operating structures and company sizes active in different regions and servicing different clients. Renegotiating prices with clients in one sector may not be met with as much resistance as others.
And with a fragmented market, rate increases are rarely implemented in unison. History dictates that companies with a loss leader strategy can only last so long and consolidation could be on the cards for the market.
With greater competition and more equipment available, how can companies navigate push back from clients regarding any hikes?