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Livestock carriers use fuel levies to beat changing prices

Eric Barker, April 8, 2022

LIVESTOCK transporters have introduced fuel levies to their rates as the diesel market continues to fluctuate and make it too hard for price predictions.

A rise in transport costs has been on the cards for a long time, with diesel and the emission-reducing Adblue fuel additive skyrocketing in price – the question has been by how much?

A major processor told Beef Central’s Weekly Kill the company was starting to get an idea of the answer to that question, with its transport costs going up 10 percent.

Queensland Livestock and Rural Transporters’ Association president Gerard Johnson said he was not surprised to hear that and most of the industry had increased rates by 10 to 15pc since the start of the year.

Gerard Johnson

“Most of the operators I have been talking to have introduced a fuel levy to keep up with the fluctuations in prices,” Mr Johnson said.

“A couple of weeks ago, fuel started jumping up 30 cents a week and it was a bit hard to keep changing the rate. Most people just adopted a fuel levy which they can update every week.”

Fuel usually makes up about a third of transporters’ costs and most operators traditionally factor it into their rates to keep consistency.

But the terminal gate price of diesel has been anything but consistent – pricing at $1.20/litre this time last year, steadily increasing to $1.50 this January, before jumping to $2.13 after Russia invaded Ukraine. It is now sitting around $1.75/litre.

Another major Queensland transporter told Sheep Central most operators in the transport industry had given up predicting fuel prices and had introduced a fuel levy to regularly adjust to fluctuations. Mr Johnson said for most transporters, fuel levies were only used in extenuating circumstances.

“Fuel levies have happened in the past, when the fuel price is fluctuating like it is at the moment,” he said.

“Most people don’t really like to do it because their clients want to know how much transport is going to cost.”

Major structural problems for the oil market

The price of diesel is based off the oil market, which has been one of the hardest commodities hit by the Russian invasion of Ukraine.

In its March report, the International Energy Agency (IEA) said there was no end in sight for the issues facing global oil supply.

“The implications of a potential loss of Russian oil exports to global markets cannot be understated,” the agency said.

“Russian oil continues to flow for the time being due to term deals and trades made before Moscow sent its troops into Ukraine, but new business has all but dried up.”

The United States has released 180 million barrels of oil from its strategic reserves, but that is not expected to have an impact on prices. The IEA report said supply relief in the short-term was unlikely.

“Prospects of any additional supplies from Iran could be months off. Talks over a nuclear deal that paves the way for sanction relief have apparently stalled just before the finish line,” the report said.

“Growth will come from the US, Canada, Brazil and Guyana, but any near-term upside potential is limited.”

Fuel excise cut has minimum impact

Back in Australia, the Federal Government last week announced a cut to the fuel excise. (See more on that here).

Recent analysis from the ACCC has found prices at the bowser should decrease more in the coming weeks.

“Over the next weeks, as petrol stations use up their stocks of fuel on which the higher excise had already been paid, we expect the reduced wholesale price to be passed through at the bowser everywhere,” ACCC chair Gina Cass-Gottlieb said.

But Mr Johnson said it was going to have little impact on the price of fuel for livestock transporters, who buy in bulk.

“We can’t claim fuel tax credits for the two quarters, which was about 17.8c, so we’re only getting a 4.3c reduction,” he said.”

“But when you are talking about $2/litre for fuel, that 4c doesn’t make much of a difference to fuel bill.”

Adblue prices remain high

On top of the price of diesel, the emissions-reducing Adblue has also doubled in price since the middle of last after stocks almost ran out.

Mr Johnson said the price of Adblue had stopped increasing, but it was a major cost to livestock transporters.

“I think the supply of it is fine, but with the cost of urea it’s hard to see the price Adblue going down,” he said.

“Last year we were buying it at 60c/litre and now it is about 150c/litre.”

 

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