Automotive Business Review February 2015 | Page 39

Mov ing Matt e r s

Fuel Price Bonanza
for Transport and Logistic Sectors

A

ccording to the Transolve operating cost tables
published in the 2014 Transport Manager’s
Handbook, expenditure on fuel makes up 31,2%
of the total costs of operating a typical 8-ton payload
van-bodied truck on urban delivery, one-way loaded
applications.
In the case of a typical 6x4 truck-tractor and flat deck
interlink combination, running loaded in both directions on a
long-distance operation, the proportion of fuel cost to total
costs rises to a whisker below 40%.
In a typical “first life” for such a rig of half-a-million
kilometres, that equates to an expenditure of nearly R4,4
million, per vehicle, on fuel alone! This explains adequately
why operators of such combinations are more concerned
about the operating efficiency of the prime mover than the
upfront purchase price.
In recent times, operators have been moving increasingly
to procurement packages that provide them with a high
level of cost predictability over a specified period, through
leasing, guaranteed buybacks, extended warranties and
maintenance contracts.

However, volatile
fuel and labour costs
remain difficult to
predict, and provide
the most important
areas of risk that still
need to be managed
in long-term haulage
contracts.

Assuming that the margins applied by retailers are subject to
competitive forces and thus fairly uniform, the price paid by
operators for his fuel would have followed a similar pattern of
rises and falls.
As can be seen, prices are now back at similar levels to those
prevailing in mid-2012. In addition to the benefits of lower
operating costs, local logistic and haulage operators should
also benefit from the lower inflation inputs being imposed on
the broader local economy by these reduced fuel prices.
As it has often been said, just about every good travels by
truck at some stage of its journey between original source
and final consumer.

Just how much of this benefit is going to be being
passed on, or retained in enhanced profitability,
is anyone’s guess, but it is certainly welcome
news to the local economy during 2015 when
other challenges, such as power shortages and
industrial action, are likely to raise their heads.

Wholesale Diesel Price Movement 2012-2015

Price (Rand/Litre).

By recycling their
fleets within the
specified period of
these arrangements,
they are able to
operate under
this minimum risk
regime on an almost
indefinite basis.

From the foregoing, it
can be easily understood
why the recent series of fuel price reductions experienced in
South Africa would have been a bonanza for the transport
and logistic sectors. In our accompanying graph, we have
tracked the wholesale coastal and inland prices of 50 ppm
and 500 ppm diesel fuel over the period from the beginning of
2012 to the present (NB: the retail pump price of diesel is not
regulated, hence the use of wholesale pricing in this study).

| Wheels in Action

37

FEBRUARY 2015

moving matters

In “normal” times, the price of diesel fuel presents
as a major challenge to transport and logistics
operators. It is, without doubt, the most unpredictable
and volatile variable cost factor that impacts on
the viability of any operation involving the movement
of goods.

In the professional
haulage sector,
where individual
operators deploy
fleets of hundreds,
or even thousands
of truck-tractors and
trailers, these risks are
multiplied accordingly.