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How businesses can protect against rising fuel prices

business-articlesHow businesses can protect against rising fuel prices
Fuel prices are continuing to surge higher, with the RAC warning that petrol and diesel could hit £2 per litre this summer. So, how can businesses alleviate the problem?

 

Why is fuel so expensive?

Fuel prices were already rising before Russia invaded Ukraine as global energy demand rebounded from the pandemic. But, as Russia is one of the world’s largest oil exporters, the conflict in Ukraine sparked fears about supply disruption, exacerbating the issue.

Since then, the sanctions slapped on Russia have pushed oil even higher. The US has banned Russian oil, while the UK and the EU are also phasing in an embargo.

In addition, crude oil is priced in US dollars. And with the pound trading near a two-year low against the dollar, oil is even more expensive.

 

How is it affecting businesses?

 

Transportation costs

Of course, the most direct impact is on transportation costs. This could be the self-employed plumber who drives to jobs or the multinational retailer with hefty haulier contracts. Even if you don’t transport goods, the costs could filter down through the supply chain.
 

Prices

With these costs growing, firms may find themselves under pressure to hike prices. This could destabilise the competitive landscape if some can afford to absorb costs and others can’t.

Price increases could also alienate your customer base as shoppers become more cost-conscious.
 

Workforce

As the cost of fuel rises, your employees may look for a pay rise to offset their surging travel expenses. Alternatively, they may want to work from home more.


 

Ways you can cushion the blow


Educate your employees

Train your employees in ways to save fuel, both when they’re driving work vehicles and their own personal cars. Hypermiling techniques – such as driving slower and avoiding harsh braking or accelerating – can cut costs, particularly when scaled up.
 

Reassess your routes

Take some time to evaluate whether you’re managing travel as efficiently as possible. Are your routes as direct as they can be? Could you cut down on the frequency of deliveries? Analyse what you’re currently doing and seek out opportunities to optimise.
 

Outsource your operations

If you’re managing your own fleet, it may be more economical to outsource to a specialist.

A dedicated haulier or delivery firm could have the size and resources to better insulate it from rising costs. Additionally, you won’t need to pay for vehicle maintenance and insurance.
 

Working from home

If your employees can work from home, considering letting them do so. By reducing their travel costs you’re helping them and reducing the pressure to increase their wages.
 

Cutting costs

Finally, you can consider other ways of cutting costs to offset the rise in fuel. This could be by budgeting more effectively, using AI technology, or working with a currency specialist for your international payments.
 


Will prices come down?

Unfortunately, analysts expect fuel prices to remain high for quite some time. The war in Ukraine looks set to grind on and the EU and UK oil bans are yet to take full effect.

In addition, summer is peak driving season in Europe and the US, so demand is likely to increase. And as China emerges from recent Covid lockdowns, it too will want to buy more oil, pushing prices higher.

The RAC has called on the government for ‘drastic action’, such as cutting fuel VAT or bringing in another fuel duty reduction. Whether No 10 is able or willing to do more remains to be seen.
 
Currencies Direct

Currencies Direct

Currencies Direct is one of Europe's leading non-bank providers of currency exchange and international payment services. Since we were formed in 1996, we've maintained our focus on providing innovative foreign exchange and international currency transfer services to corporations of all sizes, online sellers and private individuals. We have also expanded our services to provide dynamic and pioneering "business to business" solutions to help companies, tier 2/3 banks and other non-bank financial institutions to process their international payments. Our headquarters are in the City of London (United Kingdom) and we have operations in continental Europe, Africa, Asia, and the United States. Currencies Direct is jointly owned by private equity firms Palamon Capital Partners and Corsair Capital.

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