Rising oil prices crush cost hopes

26 May 2004
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27 May 2004

Procurement bosses hoping to drive down transport costs are in for a rough ride after oil prices reached their highest level for 13 years.

The Freight Transport Association warned that the volatility in the global oil market brought on by the continuing instability in the Middle East, coupled with chancellor Gordon Brown's 1.9p/litre increase in the price of diesel from September, would send haulage costs soaring.

The trade body estimated the increase would push up industry costs by £250 million a year, or around £1,000 for each lorry operating in the UK.

In addition, gas prices have soared by 20 per cent this year.

At present, 62 per cent of all the goods moved in the UK are transported by lorry.

Louisa Ballee, a spokeswoman for the FTA, warned the costs were almost certain to be passed on to buyers and customers.

"Five per cent of the cost of everything you buy in a supermarket, for example, is transportation related," she said.

But she said the traditional response for procurement professionals of moving goods by train is unlikely to be effective either, because rail networks are congested and affected by repair works.

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