Fuel price hikes hit firms hard

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Johannesburg - The price of fuel has increased by more than 560 percent in the past 15 years, which is equal to an average increase of 13 percent annually compared with the 5.25 percent year-on-year increase in the consumer price index (CPI) in the same period, according to Eqstra Fleet Management.

Effectively fuel increases had surpassed the CPI index by 247 percent in the past five years, it said in a white paper on fuel based on its findings on more than 50 fleet reviews conducted in the past month.

It highlighted that its consulting team was able to prove that fuel now contributed between 38 percent and 44 percent of overall corporate fleet costs, depending on the fleet mix.

Eqstra Fleet Management, part of the listed leasing and capital equipment group Eqstra, recommended that fleet operators should budget for at least 15 percent annual inflation for fuel when preparing vehicle travel budgets.

Murray Price, the managing director of Eqstra Fleet Management, said it was extremely difficult for fleet operators to budget for fuel, which was now the single biggest expense in their fleets.

“We estimate that more than 60 percent of companies in South Africa operate vehicle fleets to one degree or another. It has therefore become essential that management acquaint themselves with the factors affecting prices so they can effectively manage costs going forward,” he said.

Apart from supply and demand factors, fuel prices were significantly affected by taxation. Since 2007, the petrol tax index had been constantly trending upwards, Eqstra said. This was expected to continue.

Finance Minister Pravin Gordhan announced a 12c a litre fuel and 8c a litre diesel levy increase from April 2, in his Budget speech in February.

The inland petrol price increased by 7c to R14.39 a litre this month.

Eqstra said Shell South Africa figures indicated that petrol prices were expected to increase by 48c a litre during the first two quarters of this year and diesel prices by 54c a litre, which if current trends continued equated to the petrol price exceeding R15.50 a litre by the end of this year.

Price said a steep increase in carbon taxation was also expected during this year.

“At present the average carbon taxation only equates to 1c/km, which is hardly a motivator for purchasing more fuel efficient vehicles. Indications in the Budget speech are that taxation will be reviewed upwards to motivate better buying behaviour,” he said.

Price said fuel price forecasting was highly uncertain and there had been a difference of almost 16 percent between the lowest and highest prices a year during the past four years.

The average fleet vehicle consumed about 5 000 litres a year. This equated to an annual cost of R59 300 at the start of the year but a forecast cost of R67 750 by year-end, Price said.

It had become essential for fleet operating companies to ensure the optimal fleet was being run, which meant being stringent in managing driver behaviour and paying close attention to the vehicle fleet mix.


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