Diesel prices death knell to truck firms

A fresh spike in the cost of diesel is threatening to put more small trucking firms out of business, Transporting NZ chief executive Nick Leggett says.

The trucking industry body is preparing to revive a campaign it last ran about eight years ago to promote more fuel-efficient driving in the freight industry and expects to lobby the Government to extend fuel tax breaks beyond January.

Price comparison site Gaspy shows diesel is on average selling for about $2.52 a litre at the pumps, just nine cents cheaper than 91-octane petrol, but it has been spotted priced above ‘91’ at one service station.

Diesel is more expensive when road user charges are added in.

Petrol prices have been falling as a result of retreating oil prices and a dive in previously high petrol-refining margins to close to a pre-ukraine war low.

European fuel company Neste reported that the margin for refining petrol had dropped to about US$16 a barrel, over and above the cost of a barrel of oil itself, after spiking as high as $54 a barrel in June.

But the refining margin for diesel has moved dramatically in the opposite direction over past two weeks, according to Neste’s price charts, jumping from about US$32 a barrel to about US$59 a barrel.

That has pushed the difference between petrol and diesel refining margins to a new record of Us$43/barrel, which equates to about 43 New Zealand cents on a litre of fuel.

Leggett said about a fifth of trucking firms – mostly smaller operators with fewer than 10 staff – reported they had no way to pass on the extra cost of diesel to customers.

That was either because they were locked into fixed-price contracts with customers or because their customers wouldn’t wear it, he said. ‘‘Diesel has gone from being 15% to 20% of freight companies’ costs a year ago, to about 25% to 35%.’’

Leggett said it was hard to put an exact number on closures and sales that were driven by the price of diesel as such decisions could be tied up with other considerations, such as a desire among trucking business owners to retire.

But it had ‘‘absolutely’’ been the tipping point for some, he said. ‘‘We’ve seen people close their doors. We’ve seen people sell to competitors. There is a lot of consolidation going on.’’

He believed the Government would need to ‘‘think twice’’ about removing the current partial tax break on diesel road user charges at the end of January, saying he did not the expect the volatility in diesel prices to stop.