Member Article

Prepare for fuel duties, say experts

Businesses in the region should begin to prepare for the possible impact of the proposed fuel duties in August, or risk unforeseen expenditures, say experts at Yorkshire Bank.

While the Government has postponed its proposed fuel duty increase of 3p per litre until August 2012, fuel prices continue to fluctuate. Current average prices for a litre of unleaded fuel in the North East is now 131.4p for petrol, and 140.8p for diesel. If these proces remaina t or around this level in 2012, fuel prices could exceed an all time record high of 136.9p set in May 2011.

To prepare themselves for any increases, businesses should now look towards exercisiging a fuel hedging contract, which will allow them to fix prices for a set period, remicing the element of unceretainty.

Head of Treasury Solutions at Yorkshire Bank, David McGill, said: “Even North East businesses using just 50,000 litres of fuel a month should be looking at the security provided by hedging, particularly during times like these when speculation over fuel prices is intense.

“Should the proposed duty increase go ahead in August, a business with this level of fuel consumption would be facing additional costs of £1,500 per month.”

Businesses will benefit from fuel hedging as it removes guess work from budgeting, whilst also relieving worries about share increases in fuel prices, which could affect cash flow.

Hedged fuel prices relate to the daily rates quoted by the Platt’s Index which provides price assessments for vital commodities such as fuel. The hedged prices are agreed at the start of the partnership between the bank and the the company, and do not deviate with changes to makret price during the contract.

David McGill added: “While average UK petrol prices have dropped from their record high of 136.9p per litre in May there is no guarantee that the downward trend will continue.

“The elevated prices of mid-2011 arose due to a combination of volatile factors, including unrest in the Middle East and economic uncertainty in the established high fuel consumption countries.

“Both these factors are still very much in play so it remains important for businesses of all sizes to stabilise their fuel purchases and be in a more secure position to manage their business.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .