A sharp spike in oil prices amid tensions in the Middle East has exposed how haulage firms that built large fuel charges into their rates when diesel was cheaper now have little room to increase them further as costs surge.
Industry leaders say the latest volatility around the Strait of Hormuz has revealed starkly different approaches to fuel surcharges across the sector, with some firms maintaining transparent mechanisms that rise and fall with diesel prices, while others either inflate charges during cheaper periods or avoid them altogether to remain competitive.
Alison Jeffrey, MD of Malco Freight in Ely, said the latest surge had already delivered a major blow to operators.
“If any haulier doesn’t pass on the huge spike in fuel prices then they can kiss goodbye to their business as the exponential increase cannot be absorbed,” she said. “One week at a 15ppl increase has been a shock to us all.”
Jeffrey warned that inconsistent use of fuel surcharges was now creating problems for some operators.
“Fuel surcharges have never been aligned across the industry and some hauliers have been scared to pass on price increases, so have hidden all the extra charges afforded to them behind an inflated fuel surcharge,” she said.
“My concern is that those who hid those charges with a 10%+ FSC where prices were low have nowhere to go now that they’re massively spiking.”
She added that operators who had been transparent with customers, particularly those in pallet networks, had instead increased base rates and maintained a “realistic and transparent” surcharge.
One fleet manager at a major UK retailer said oil and gas commodity prices had risen by around 50% as a result of the conflict, translating into roughly a 25% increase in diesel costs on fuel invoices once taxes and supplier margins were taken into account.
Tom Johnson, director of logistics at Transervice Group in West Bromwich, said some operators would inevitably try to absorb rising fuel costs in order to remain competitive.
“Some operators will do the responsible thing by adjusting fuel surcharges to reflect the genuine increase in costs and protect the sustainability of their business,” he said.
“Others will inevitably keep their surcharges artificially low to chase work. That might win a few contracts in the short term. But it’s rarely a strategy that builds a strong stable business.”
Pall-Ex group chief executive Kevin Buchanan told MT that operating without a transparent fuel surcharge is “financial suicide,” while Bob Terris, chairman of Meachers Global Logistics, said operators doing so are taking an “incredible risk”.
