COST INDEX: Fuel falls, keeps September qtr in check

Date: 10.11.2008

Easing fuel prices allow freight carriers to keep operating costs in check in the September quarter

Easing fuel prices allowed freight carriers to keep operating costs in check in the September quarter, ATN's cost index shows.

The ATN-PKF Truck Operating Cost Index - now updated for the previous quarter and available as a useful budget tool exclusively for ATN subscribers - shows cheaper fuel bills saw budgets increase only marginally, if at all, for many operators.

Terminal gate wholesale prices for diesel, the best measure of fuel costs for trucking fleets, fell to $1.65 per litre on average across the country during the three months to Sepember.

The figure from the Australian Institute of Petroleum, the member body of the major oil companies, had hit a high above $1.80 per litre in late July as insatiable oil demand and production cutbacks saw oil stocks skyrocket.

But the global economic turmoil has put downward pressure on oil prices, with the wholesale diesel rate now as low as $1.40 around the country.

Still, figures from the Australian Bureau of Statistics show transport costs overall are still rising, with the transport (freight) and storage industries index jumping another 3.5 percent in September. The index has now increased 7.7 percent through the year.

Road freight remains the biggest contributor to transport cost inflation, with the road index up almost 5 percent.

Trucking employers were at least spared much higher workers' compensation fees, with the ATN-PKF Cost Index reporting marginal rises and some declines in state-based annual premiums during the September quarter.

And while award rates remained unchanged, many operators are reporting continuing labour shortages which is pushing up wages to secure workers.

PLEASE NOTE:
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, Australian Institute of Petroleum and state workers' comp authorities.

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 wholesale, or factory gate, price of a litre of diesel after excise and the diesel grant refund, averaged across capital cities 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 WorkCover 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.

The model remains an independent and credible source on operating budgets and rate structures. But the spreadsheet 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) 3166 2314.