ESC calls for proactive future fuel surcharge planning

The European Shippers' Council said Friday that the industry should use the temporary respite in fuel prices to set up long-term mechanisms that more adequately reflect fuel costs for transportation companies to pass along to shippers.

Simply because the pressure is off with fuel prices having fallen dramatically since the summer, does not mean industry should forget, the ESC said.

The call to action is aimed specifically at over-the-road operators and their shipper customers.

These companies are not always able to pass on the full costs to their customers because they too are under immense pressure to hold back against soaring costs within their supply chains, the ESC statement said. For many companies operating themselves at the margins of profitability, or dependent on low-cost transport, any sudden and prolonged cost increases as were witnessed when the world price of oil went through the roof, can prove equally disastrous. Equally, if transport service providers go out of business this exacerbates the shortages of service capacity that already exists in the road freight sector.   The shipper group pointed to a recent overhaul of fuel surcharges by Air France-KLM, a move that has won approval from shippers.

The airline has reset the base price of oil to a more realistic level (based on more recent oil price history) and moved much of the fuel price below this rate into the overall freight rate, the ESC said. The result is that surcharges are less and customers are able to negotiate a freight rate which includes more of the fuel cost element within it. There are things that can be done and mechanisms that could be explored today, by industry and governments alike, added ESC Secretary General Nicolette van der Jagt. The ESC urges the European governments and intergovernmental institutions to proactively respond to the recent fuel crisis, and not to wait until the next one before opening this issue again.   She added that shippers would likely press for surcharge reductions as the price of oil has fallen, but that a more constructive way forward would be to lock up long-term all-in rates.

Shippers will of course want to see fuel surcharges fall now as quickly as they rose, she said. But we also sense that shippers want to see longer term all-in rates which eliminate the need for such regular and steep rises and falls in fuel surcharges. Now is surely the time that service providers will want to work with their customers to get through the difficult market conditions, rather than work against them with unfriendly surcharges.

Source: American Shipper