The effects of inflation on the supply side of the European road freight market, especially on diesel prices, have led to substantial increases in road freight rates in the first quarter of 2022, according to the IRU.
The war in Ukraine and the subsequent restriction of oil supplies from Russia into Europe has led to further upward pressure on prices. The EU-wide weighted average of a litre of diesel has risen sharply since the third quarter of 2021. Compared with the pandemic-induced low during the second quarter of 2020, the weighted average cost of diesel was 52.7 percent higher in the first quarter of 2022.
The worst effects of this fuel price increase may be yet to be registered in the quarterly index, as the price spike did not occur until after the war started in Ukraine on February 24, and carriers were able to make use of fuel purchased in advance at lower prices through the end of February and early March. With lower-cost fuel reserves now depleted the impact on rates is likely to increase in the near term.
Rising cost pressures, supply and capacity disruptions, regulatory change and war in Ukraine have all impacted road freight rates.
“The result of the forces currently exerting themselves on the European road freight market is an uncertain, challenging and complex market environment,” said the IRU. “After buoyant consumer spending in 2021, rising inflation in the first three months of 2022 and the expectation of higher interest rates to come have seen confidence amongst consumers erode in much of Europe, including in Germany, the UK, Spain, Italy and France.”
While the most apparent effect of the war in Ukraine has been to increase fuel prices, the conflict has also worsened the European driver shortage, driving up labour costs and applying more upward pressure on rates.
The outlook for 2022 is for inflation to persist in most economies and fuel price to remain high, so it is highly likely that freight rates will remain elevated and may even continue to rise over the coming quarters across Europe, at least until the end of 2022, added the IRU.