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Operators left reeling by skyrocketing diesel prices

skyrocketing diesel

When a customer told operator Chris O’Brien that he hoped the skyrocketing diesel prices would go down in a few months, the Queensland truckie had a quick-fire response.

“I turned around and said, ‘mate, we might not have a couple of months in us – it could be weeks’.”

O’Brien, who helps run a small family-run general freight company in the far north of the state, said the situation is “really scary”.

“We don’t know if we’re going to make it through this one – and I feel really sorry for all the owner-operators at the moment. It feels like there’s no end in sight.”

O’Brien said that at the start of last year, it was costing the business about $1800 to run one of its three trucks one-way to Brisbane from the Cairns region.

Today, with diesel soaring north of $2.20 per litre at the time of writing, that same route is stinging them $3700.

“We’ve put the freight rate up as best we can, without the customer screwing their nose up. They understand, and have been really good about the situation, but they can’t take much more either.”

O’Brien said that after deducting truck payments and wages, the company isn’t even breaking even on its usual runs.

If the prices would just hold steady for a few weeks, O’Brien said the business could work out a freight rate and work with the customers on a formula pegged to the bowser price.

“We can push through it, but if it doesn’t stop climbing, that’s what’s really going to kill us.”

All around Australia the dire reports of the recent price hike impacts on the smaller operators are the same.

Further south in NSW, a Road Freight New South Wales (RFNSW) member who runs a small fleet in the construction sector described the current climate as “crazy” due the “insane” price increases of recent weeks.

“From an operator’s point of view, you do your best to control your expenses, but this is one of those situations that’s completely out of your control,” he said.

“We only have five trucks but that actually means the impacts are more because we don’t have the buying power to buy in bulk.”

His primary run is from Sydney to Newcastle, and with margins so tight, if he misses a backload, he’s losing money.

“The pressures are right across the board, from labour shortages to now fuel costs and increased tolls: it’s just become crazy.

“That’s why you see so many companies folding up because it’s not a viable business anymore.

“Reward for hard work is very hard to come by nowadays.”

Hoping for support

With financial commitments and staff to think about, the operator said he’s digging in to fight through the fuel crisis, hoping for a bit of government support.

“If the excise gets removed that would be fantastic, but any person with half a brain knows the government needs to continue to earn money, and if they’re going to continue to remove all these taxes while they shell out all this money for Covid, floods, what-have-you, someone is going to have to pay somewhere along the line.

“We’re in such a difficult situation, and these fuel costs drive inflation, I feel.”

Another small fleet owner and RFNSW member told us the fuel surcharge should be about 25-26 per cent at present, but clients aren’t willing to shoulder the added cost.

Like many operators he is hoping for some relief in the federal budget released on March 29, with a cut in the 44c excise tax already being mooted as a likely short-term solution.

“We’re not getting any relief anywhere; registrations, insurance, tolls, there’s nothing.

“It just seems to be that transport is the easy target because you’re on the road every day.

“Everyone is okay at the moment, but what’s going to happen in 30, 60 and 90 day’s time when you’re wondering if you’re going to get paid?

RFNSW CEO Simon O’Hara told Big Rigs he believes this is “just the beginning” of fuel price increases, with all members already finding it difficult to pass on the increased costs to clients and customers.

“There are frank discussions happening about costs,” said O’Hara.

“Customers don’t realise, or are choosing not to realise that the increase fuel costs are impacting the bottom line for smaller operators.

Smaller operators are struggling to raise with their customers that these are indeed costs and they are going to continue to go up. Even those most recently who have negotiated higher prices are finding those prices aren’t sufficient given the way the northward bound trajectory of the fuel costs.

Bigger guys aren’t immune, but they mostly negotiate fuel increases into their contracts. If there is an increase, then there is a mechanism within contract to deal with that.”

Transport companies could go broke

Former truckie-turned Labor Senator Glenn Sterle believes the diesel price hikes will have dire consequences for the road transport industry.

“There will be some firms that have locked in fuel levies for their clients but I know that there will be a significant number of companies and owner-drivers who will not be able to. As a result, we will see many transport companies go broke or just shut up shop,” said Sterle.

“The road transport industry is not the bank of Australia and we can’t expect the trucking industry to just suck up this huge cost impost while delivering essential goods around the nation. And this should not be allowed to happen.”

By deadline for this issue, there was still no sign from the Morrison government that it would heed calls from the industry to cut the excise tax to bring some relief at the bowser.

“So, for all the praise Morrison gave to the road transport industry throughout the pandemic, how much are his words worth now?” added Sterle.

Richard Olsen, the Transport Workers’ Union state secretary for NSW/Qld, agreed that the federal government should be doing much more to help truckies.

“In fact, waking up would be a good thing,” said Olsen.

“We just can’t continue to absorb these costs and having to ride them out is just unacceptable.”

At the very least, Olsen believes the Morrison government should abolish the fuel excise tax until the end of the financial year.

“After that we can have a look at things to see where we are in the transport industry, making sure roads are open, and companies can actually operate at a profitable level, and don’t have to cut corners.”

Olsen also called for state government to step in and provide some toll relief, particularly in Sydney.

“I’d like to see a cap on daily usage of tolls; there’s got to be something. We can’t continually absorb these costs.”

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