NBG alarmed over high fuel costs despite declining oil price

NBG alarmed over high fuel costs despite declining oil price

National Buying Group has questioned the continuing high cost of fuel at the pump despite the recent decline in the oil price.

The group says that the differential between the cost of fuel at the pump and the price of Brent Crude has increased, despite the price of oil dropping by nearly 16% since the beginning of March. In the same period the average price of a litre of unleaded petrol rose by 5.7%.

Noting that high fuel prices are impacting merchant margins and profitability, NBG MD Nick Oates said: “What we’ve seen over the last six weeks is a significant decline in the price of Brent Crude that is not being reflected in the price at the pump. This is impacting all businesses that use delivery vehicles or couriers, not least the independent merchant sector that is suffering from on-going margin erosion and reduced profitability.”

The price of Brent Crude has risen steadily from a low of $68.87 per barrel on December 12th to a peak of $127.98 on the 8th of March. Since then, the price has dropped as low as $98.02 per barrel on the 16th of March. In early May, Brent crude was trading at around $108 a barrel, down nearly 16% from its early March peak.

Nick says independent merchants are particularly vulnerable to rising fuel costs, both in terms of deliveries when using their own fleet – fuel costs for a heavyside merchant could account for as much as 15% of operating costs on some products – and the costs associated with couriers and pallet companies.

He explained: “The independent merchant sector has long-term contracts with Suppliers but delivery from merchant to site is an additional cost that must be kept under control. What’s more, courier companies and pallet providers are often levying surcharges for increased fuel costs that cannot be passed on to customers.

“The old rule of what goes up must come down does not yet appear to be applying to the cost of fuel, although it must fall soon. It is vital for the continuing health of the independent merchant sector that any reduction in the price of oil is passed on as quickly as possible at the pump and then by Suppliers into product price reductions.”

For more information on National Buying Group, including how to join, visit www.nationalbuyinggroup.com

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