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Rising to the challenge
Page 9
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The barrel price of crude oil is set to rise further in 2008 — which is why Paul Holland advises operators to pass on costs to customers and keep talking to fuel card operators.
Happy New Year! At the risk of starting the year on a downbeat note, 2008 does look like being challenging for business, particularly those that are reliant on oil and credit.
We've seen the barrel price of crude rise above $100 in the past few days and while it has eased a little at the time of writing, all the indicators are that it will continue to rise. Back in 2005 Goldman Sachs was predicting a $105 barrel price in the short to medium term and everyone laughed, but not any more. The analysts are talking about a potential barrel price of $150. If that happens, and we have to hope it won't, then you're looking at fuel prices going up by 18p/lit, and that's without any fuel duty increases the Treasury might be planning.
This escalation of cost is, of course, a worrying state of affairs, Out it seems many operators have already passed risk on to their customers in the form of fuel clauses In their contracts. During 2007 the bulk price of fuel rose from 72p/lit to somewhere in the region of 90p. It's unlikely any company could still be in business if it wasn't passing costs on.
However, I would urge all operators to look carefully at their credit lines and keep in regular communication with fuel card operators so we can help.
The amount of credit available to an operator is going to be dependent on the strength of the business and it is critical all companies get a handle on their available credit and ensure they have sufficient headroom to operate. So keep in touch with us, and don't get into the situation where your fuel supply is at risk. It might be tough in the coming weeks, but companies who adopt a policy of careful management and good planning will prosper.
"It seems many customers ha already passed risk on to thei customers in the form of fuel clauses in their contracts"
• Paul Holland is managing director of ReD Fuel Cards