COST INDEX: Fuel spike pushes truck costs to record highs

By: Jason Whittaker

Diesel costs skyrocketed some 27 cents per litre in the previous quarter, in the most rampant inflation of truck operating

Diesel costs skyrocketed some 27 cents per litre in the previous quarter, in the most rampant inflation of truck operating costs seen.

The 14 percent blowout in fuel costs over the April to June quarter pushed operating costs to record highs, ATN's exclusive cost index shows.

For some trucking operators with a fuel bill up to half of their running budget, the ATN-PKF Truck Operating Cost Index spiked more than 10 percent higher during the quarter.

The national average retail price of diesel was $1.73 during the quarter, the highest in the ten-year history of the index.

Diesel costs have risen higher in July, though lower oil prices should filter through the Australian market in coming weeks.

Many employers were also hit with a higher wages bill, with the Fair Pay Commission awarding drivers a significant pay rise in its decision earlier this month.

The unrelenting rise in oil prices has impacted all sectors of the transport industry. The Australian Bureau of Statistics (ABS) reports its transport (freight) and storage industries index increased by a significant 2 percent in the June quarter, and by 4.6 percent through the year.

While the road freight transport index jumped 2.1 percent over the quarter, rail transport (7.5 percent) and coastal shipping (7.1 percent) faced even steeper cost increases.

On the consumer side transport costs blew out by 3.1 percent according to the ABS, despite inflation being kept largely in check with an overall 1.3 percent increase in the consumer price index.

The ATN-PFK Truck Operating Cost Index — developed by Rick Copping of chartered accounting firm PKF and prepared by ATN — is available as a downloadable spreadsheet exclusively for ATN subscribers.

The index measures truck operating costs for a typical long and short haul operation, based on cost input figures from reliable sources including the Australian Bureau of Statistics, FuelTRAC and WorkCover authorities.

To become a subscriber to ATN and gain access to the ATN-PKF Truck Operating Cost Index subscribe online.

ATN will no longer publish an overall rise figure in releasing the quarterly cost index results. This percentage rise figure was based on operating budgets that bare little resemblance to the current operating environment.

With fuel contributing up to half, and in some cases more, of a typical operating budget, it is important operators enter their own figures into the cost index model. The spreadsheet allows operators to submit their own operating cost figures (in the Expense Amount column) and attribute each category with a percentage of overall operating costs (in the Cost Weighting / Inc. Fuel column) to find out the percentage rise in overall costs across the quarter.

The fuel figure in the index is the retail cost of a litre of diesel after excise and the diesel grant refund, averaged across the seven major capitals (Darwin, Sydney, Melbourne, Brisbane, Adelaide, Perth and Hobart) and averaged across the three months of the previous quarter. This is done to compare these costs with quarterly ABS figures and fixed costs like vehicle registration, award wages and workers’ compensation premiums.

Users of the index should note this figure does NOT represent the highest cost of diesel throughout the quarter, nor the current cost of diesel post-quarter.

Customers and prime contractors who are using the index to pay rates should talk with their carriers to determine their individual costs and sustainable rates compensation based on the current operating environment. Consignors should only use the cost index as a guide for TYPICAL truck operating costs as an AVERAGE over the previous quarter.

ATN stands by this model as an independent and credible source on operating budgets and rate structures. But the index should NOT be substituted for sound financial analysis and advice. ATN staff are not financial experts and will not provide advice to operators or support rate increase proposals.

For feedback or further information on the cost model contact Managing Editor Jason Whittaker on (07) 3216 2314.

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