Diesel price surge: Freight firms add fuel surcharges as costs jump $14m a day

National Road Carriers Association general manager of policy and advocacy James Smith said diesel prices were well beyond any operator’s ability to absorb.

“If you look at it through the simple math that New Zealand uses roughly 11 million litres of diesel a day [data from the Ministry of Business, Innovation and Employment], the cost of that fuel has increased by almost $14m a day,” Smith said.

When looking at the cost of diesel for truck usage alone, it has increased by roughly $7m a day.

“Now, not all of this impact will occur as some demand will drop as people make decisions to reduce consumption, but that in itself is a challenge as it reduces GDP and has potential to trigger another slump.”

Smith said it was difficult to see what, if anything, the Government could do that would not create long-term problems. He said the Government was doing as much as it could to ensure supply continues.

Mainfreight group managing director Don Braid said diesel pricing was the biggest issue facing the company, confirming surcharges were already in effect.

“We’re having to recover that cost from our customers with an increase in fuel adjustment factors,” Braid said.

“It differs between customers and across the business and arrangements that we have with each of our customers... rest assured that I think every transport company’s placed in the same predicament with fuel rising at the pump.”

Braid said the surcharge was needed to recover the difference spent by Mainfreight’s owner-drivers, although he confirmed that he had received no reports from drivers of concerns about access.

He also said it was too early to consider the impact on the business’ financial results, but the business was maintaining a close eye on the situation and attempting to keep ahead of the spike with adjustments.

“We’re asking customers to continue to book as normal, and that includes international freight. We’re yet to see any impact on international sea freight, but we do expect bunker adjustment factors to increase to take into account the increase in bunker fuel [heavy fuel used by ships].”

Braid said air freight prices were also rising as capacity declined, but said the company was working closely with its customers to ensure freight continues to move as expected.

One area of concern Braid did raise was a lack of communication from the Government and its officials.

Braid said the company was relying on the Government to be honest and upfront about supplies, but said he hadn’t had any contact from officials.

“I think there’s some lessons from the Covid-era that when the Government finally involved business to understand what was happening at the coalface, then we found remedies and answers.

“I’d urge this Government to do that but maybe they’ve got too much other stuff on their plate.”

Freightways chief executive Mark Troughear said the fuel price increases had been significant over the past three weeks.

He said all Freightways’ businesses had a fuel adjustment factor (FAF) to recover the costs of fuel, with some of them kicking in immediately while others have a slight lag before they are effective.

“We have no concerns at this stage regarding access to fuel but will naturally monitor this situation closely,” Troughear said.

A spokesperson for NZ Post said there was currently a sufficient supply of diesel and that the company was closely monitoring longer-term fuel availability and price movements.

“It’s too early to say exactly what the impacts of higher fuel prices will be, but we are watching the situation closely,” the spokesperson said.

“Changes in fuel rates take time to flow through, but we have established processes in place to respond to variable costs like fuel price movements, in line with standard courier industry practice.

“This can move up or down depending on fuel prices, and helping manage volatility for our business and courier delivery contractors.”

The spokesperson said the majority of NZ Post’s fleet relied on diesel, with a small pocket of electric vehicles.

Tom Raynel is a multimedia business journalist for the Herald, covering small business, retail and tourism.