New Year Triple Whammy on Fuel costs

Many fleet operators breathed a sigh of relief when the Chancellor announced no increase in fuel duties in the Autumn Budget. However, the cynic might argue that this was not generosity on his part, but an act of illusion to rival the best magicians.

Reality is that the underlying cost of fuel will increase from January 1st 2019 due to three reasons, all of which benefit the treasury. Reinforcing, once again, that it is still important for fleet managers to be reviewing fuel costs to mitigate the impact.

The Renewal Transport Fuels Obligation (RTFO) was introduced some time ago, but from 1st January, the proportion of bio-fuel blended into all fuels will increase from 7.25% to 8.5%. However, the cost impact is greater because bio-fuel is generally traded at a higher cost per litre than mineral fuels.

New Fuel Obligation

Additionally, a new Development Fuel Obligation will be added to the RTFO requiring the inclusion of “Development fuels” into the fuel mix. However, there are no approved development fuels available to supply the market, so fuel suppliers will have to pay a “buy-out” fee of 80ppl. For 2019, the obligation is set at 0.1%, therefore adding 0.08ppl to each litre delivered.

Finally, a new Greenhouse Gas Obligation is introduced, and again the required standard cannot physically be met as the fuel would then not comply with BS standards. Consequently, the effect is that a further 0.42ppl will be added to Gasoil and Derv, and 0.31ppl to Petrols.

There is of course a further VAT benefit to the treasury with the above underlying increases.

All of the above are now set to continue to increase in future years.

How ERA can help

Clearly the costs associated with running and managing fleets are going to increase in 2019. Exactly how this will impact your bottom line will depend on a variety of factors, but unless organisations are dealing with these increases now and preparing ahead of time, the costs are going to be higher and more difficult to offset. That’s where ERA can help as our fleet specialists are ideally positioned to provide a plan of action and to help you make appropriate changes to minimise the impact of these rising costs. To find out more or to discuss your situation, contact us today.

About the Author: Duncan Rogers, in addition to achieving substantial savings, Duncan’s approach means that the client obtains a clear understanding of how their prices relate to the wider fuel markets. Monthly monitoring of purchasing behaviour and compliance with company policies ensures best value is maintained and sustained.