Fuel costs are rising – act now to make savings

Warnings of fuel price rises have hit the news this week, with drivers being told to brace themselves for higher motoring costs. With the price of petrol and diesel rising, The Fuel Store team explores the reasons behind the increase, and what can be done to manage fleet fuel costs.  

The impact of rising fuel costs

With geopolitical and economic tensions exacerbating price uncertainty into 2025 (more on this below), it can be hard for businesses and fleet operators to manage cash flow. Business vehicles, and the cost of running a fleet, represent a significant cost for many UK companies. As fuel costs climb, so do business operating expenses. Companies heavily reliant on transportation—such as delivery services, manufacturers, and import/export businesses—face difficult decisions about whether to absorb these costs or pass them on to their customers. Higher fuel prices also affect consumer purchasing power, potentially leading to reduced demand and negatively influencing the broader economy. Beyond the direct impact of increased transportation costs and diminished consumer spending, rising fuel prices can disrupt supply chains, often passing additional expenses onto small businesses. With fuel prices fluctuating daily, forecasting expenses and managing cash flow becomes increasingly difficult. For small businesses, accurate cost projections are critical for maintaining long-term profitability.  

Look for incremental savings

While not a magic bullet, corporate fuel cards can help shave a significant chunk off fuel costs - as well as saving valuable time on expense management. In 2023, the average saving for our fuel card holders sat at around 12.5 pence per litre. AdBlue users also stand to benefit from savings on bulk purchases.  

Monitor and manage cash flow

While not a direct reduction in the cost of fuel, fuel cards can help when it comes to managing business cash flow. Weekly invoicing for fuel allows fleet managers to keep tabs on fuel spending, and budget for fuel costs, helping to manage cash flow more effectively. For customers such as Tomsetts Distribution, who had always bought full bunker loads of 36,000 litres of diesel every month, moving to fuel cards made a huge difference to cash flow. Pre-pay or fixed pricing options can help further.  

Increase efficiency with data-driven fleet management

With driver shortages impacting efficiency, and costs escalating, taking a deep dive into fleet data can help fleet managers to identify actionable insights that directly impact the company’s bottom line. All of our fuel card customers get access to an online portal that provides data such as fuel spend and usage, transactions, card and budget management tools. Those looking for deeper business insight can opt to add software called Fuel AI - a handy tool that can combine and analyse a host of data, helping fleet managers to quickly identify trends. Having access to this data can support data-driven decision-making, which, when used to its full potential, can save as much as 9% off fuel costs.  

Avoid costly fines - stay compliant

With DVSA officers tasked with spot-checking vehicles, those who don’t comply will be subject to fines, and can be taken off the road - both of which can cost firms dearly. Driver Toolkit digitises the vehicle checking process, helping to reduce the costly fines associated with non-compliance. Managers simply send drivers a QR code, drivers complete the checks on the digital platform, and submit the result. As well as ensuring safety and compliance, fleet managers have a record of results, and data can be easily retrieved in the event of a DVSA roadside check.  

Avoid the risk of card fraud

During July-September 2023, the DVLA received over 39,000 requests for information on drivers thought to be guilty of fuel theft - 77% more than 2022. Cases of fuel theft have been numerous in recent years, from a bin lorry driver who stole £42,000 of fuel, to a delivery driver who stole more than £56,000. While some cases involve huge amounts of money, others can be as simple as drivers using cards to top up personal vehicles - but the amount soon adds up. Investing in protection against card fraud is an important step to protecting your business against unexpected costs.  

What influences fuel pricing?

Wholesale fuel prices govern the price that businesses and consumers pay for petrol and diesel at the pumps. These prices are influenced by a range of factors, including supply and demand; pricing for crude oil and oil refinery production levels; the pound-to-dollar exchange rate; socio-economic and political factors; the margin (profit) taken by fuel retailers; and fuel duty and VAT charged by the Government.  

Fuel costs - a year in review

As the list of factors outlined above suggests, the situation isn’t a simple one. The factors influencing fuel prices can vary from week to week - a topic we do our best to tackle via our weekly Fuel Price Pulse blog and customer communications. This year has been no exception to the rollercoaster ride that is fuel pricing. 2024 was marked by escalating instability in Ukraine and the Middle East. Global economic challenges including a weak Chinese GDP fuelled fears of a global economic slowdown, while OPEC+ production cuts also impacted pricing. Prices dipped to their lowest level for almost three years in September, when forecourt prices were nearly 7p per litre cheaper across the UK than the month before. Trump’s re-election in Q4 triggered market rallies and talk of sanctions. During the same period, Iran-Israel conflicts intensified, Ukraine deployed long-range missiles, and OPEC extended production curbs into 2026.  

Fuel pricing - the current situation

In recent weeks, prices have been climbing steadily. Ongoing geopolitical tensions between Russia and Ukraine, as well as Middle East unrest, combine to create market uncertainty - a risk to oil-producing regions could impact supply - pushing prices higher. US Sanctions on Russia and Iran have also threatened to reduce supply and push prices upwards. Meanwhile, data released by the US last week pointed to stronger economic activity. As a major oil consumer, improvements in economic activity in the US set expectations for a boost in demand for oil. Business activities also accelerated more than expected in major European economies, including Spain, Italy, France, and Germany, which is also expected to boost demand. Meanwhile, traders are closely watching China’s stimulus plans, which could drive demand further. While these signs of economic recovery are positive, increased demand, combined with volatility in supply, tends to push prices higher. Cold weather has also put pressure on fuel supplies.    

     

Choosing the right partner

Fleet management is a complex undertaking. Sustainability, digital transformation, e-commerce trends, risk management and workforce management will continue to drive change in 2025 - while outside influences will continue to impact pricing. Working with a supplier that can help to identify fleet and fuel efficiencies, however small, could make all the difference to the road ahead. Speak to our team to find out more about how we can reduce your fleet fuel spend in 2025.