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What if fuel hits £2 per litre? (continued)

Date: 13 May 2008

Tristan Young asks the fleet industry what might happen if the relentless fuel prices rises continue

Nigel Stead, managing director at leasing company Lloyds TSB Autolease

"If fuel hits £2 a litre it would have a dramatic impact on road transport and effect general living standards.

"Our customers will need to reduce costs to offset the increase and we would expect to see greater emphasis on in-depth fleet reviews and consideration of alternative vehicles, as well as strategies to reduce the distances people are required to travel.

"Looking further forward, I see the impetus at which new fuel-efficiency technology is introduced accelerating. We can anticipate significant developments of better battery technology using lithium-ion for electric cars and vans, newer more efficient hybrid solutions, and later the introduction of hydrogen and/or hydrogen-hybrid systems. Businesses which embrace these new technologies will gain a considerable lead on their competition as they will reduce their cost base and clearly demonstrate their environmental credentials.

"Practically, more people will encourage the use of video conferencing and organisations will plan effective ways of limiting the amount of business travel.

"Overall this would have a dramatic effect on the road transport landscape. Management will recognise that to survive and prosper will require a transformation in the approach to transport and business travel."

Nick Hardy, divisional director at fleet management specialist Ogilvie Fleet

"I'm pretty sure none of us wants to see £2 per litre but the way oil prices are rocketing I wouldn't like to say never. The £1.50 mark is much vaunted to be hit by the end of the summer.

"We are taking the matter seriously and its potential effect on the vehicle market in general features highly in our minds. A large impact on the resale value of the most and least economical vehicles would be inevitable and there's the possible impact on all resale values as consumers decide to reduce the number of vehicles they need.

There's also the potential reduction in the number of company cars as public transport becomes more efficient. On the plus side, environmentally, there would be a continued move to the most fuel-efficient vehicles. All of these scenarios would impact on our business and require changes in thinking and operations.

"We are investigating ways we can reduce our own vehicle operating costs. We have over 600 employees and hundreds of vehicles so our costs are escalating. While acknowledging the need to maintain motivational employee benefits, we're looking at ways we can reduce fuel costs, including training drivers to drive more economically, check tyre pressures more regularly, increasing journey efficiencies and car-share wherever possible. We recommend fleet managers do the same and ensure their vehicle choice lists include the cost of fuel (as well as NIC, taxation etc) in their calculations.

"We envisage the consultancy side of our business expanding to include help with searching for the cheapest fuel and improving driver awareness (and driving habits) to minimise fuel costs."

Roddy Graham, chairman of ICFM & commercial director of lease company Leasedrive Velo

"A £2 a litre cost of fuel at the pumps would have a significant impact on the business, both in terms of the high rise in overall motoring costs to us and our [Leasedrive Velo] clients. Such a dramatic increase would inevitably bring into sharp focus the fleet mix in all organisations.

"At the earliest opportunity, firms would divest themselves of cars emitting over 180g/km of CO2 from their general fleet due in principal to their higher VED rates and poorer fuel economy, not forgetting their more adverse impact on the environment. However, with such a high fuel cost, the latter factor would be a secondary consideration.

"Vehicles with better fuel economy and lower CO2 emissions will consequently command better RVs in the future while the poor performers in terms of fuel economy will see their RVs drop. In the case of vehicles emitting over 225g/km, I would expect to see significant falls in depreciation due to their higher operating costs. The more fuel goes up, the more popular the most economical cars are going to be.

"Green will mean lean in the future, both in terms of fuel efficiency and cost of operation."

Carl Griffiths, fleet manager at engineering business YM Tools

"As an engineering business (a medium-size firm employing 60 staff) with a fleet of vans for service engineers plus sales guys in diesel Vauxhall Vectras, our costs are escalating and we are struggling to keep up.

"We run smallish diesel vans as most of our service men use them as mobile toolboxes. Last year we switched to diesel Corsas and are getting great fuel economy; some have clocked up 60,000 miles and we get 50 to 60mpg but still or fuel bill is going through the roof.

"We aim to pass the costs on and make our service rates more expensive, increasing industry-wide costs; we would have no alternative as our margins can not stand any more pressure."