Fuelling business woes

THE record jump in the price of crude oil over the weekend is a major blow to many, but particularly courier and freight companies, truckers and live-stock transporters, and their customers.

While not unexpected, in a tight business climate this latest hike puts even more pressure on smaller companies in particular.

From tomorrow Regional Express airlines (Rex) and its subsidiary AirLink will increase their fuel surcharge by $4 a sector. This will see their fuel surcharge go up from $40 to $44.

Rex's freight arm Pel-Air will also be increasing its per hour costs to customers.

Rex general manager, Network Strategy and Sales, Warrick Lodge said: “With the price hitting $US143 per barrel last week we have to react promptly to ensure the partial recovery of this cost for the essential services that we provide.”

Northern Rivers courier and freight companies were reluctant to go on the record about how they're managing, but it's clear some are struggling and wondering how much they can increase charges without losing clients. In such a competitive market, it's a delicate balance to keep their businesses viable.

The trucking industry has been more up-front about spiralling oil costs, saying customers will have to pay higher freight rates to reflect the massive price of diesel.

Australian Trucking Association's Trevor Martyn said the retail price of diesel was now more than 180 cents a litre compared with around 134 cents a litre in October last year – a 35 per cent increase. He has warned the price could go above $2 a litre in the next few months.

Mr Martyn said some companies imposed regularly adjusted fuel levies, although others were trying to absorb the rising cost of fuel.

He was frank in his assessment of the near future.

“Our customers have got to understand they face a stark alternative. They can either pay freight rates that reflect the cost of fuel or a large number of trucking companies will have to close down,” he said.

That would mean a big squeeze on available operators to move goods in a timely way, he said.

The trucking association is also looking at other reforms such as putting more B-triples on the road – trucks with three trailers. These massive vehicles can do the work of five semi-trailers, saving time and costs.

Ben Martin, general manager of Eden Country Stores at Kyogle and Bangalow, said customers were being hit hard by the fuel impost.

“They're particularly worried about commodity prices and the impact of higher fertiliser costs and other inputs into the farm,” he said.

“We're not doing as badly as our friends out further west, but it's still extremely worrying.

“Another big cost is the increase in getting cattle and produce to market. Transport costs in the form of fuel surcharges are going up all the time and it's a major concern.”

The Senate has set up a wide-ranging inquiry into the impact of higher petrol prices on farmers, families and tourism, but the reporting date is not until October 2009.

However, it's not all gloom and doom, with one of Britain's top oil and gas executives telling the ABC he believes current record oil prices cannot continue.

He indicated relief for battered global share markets and the world economy.

Frank Chapman is the chief executive of BG Group and he said in his view a sustainable price for oil was just $US55 a barrel once investor anxiety was taken out of the equation.

“The current prices, if you look at the underlying long-run marginal cost of oil production, are too high to be sustained,” he said.

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