Coventry and Warwickshire companies are being advised to
consider setting their fuel costs now as a strategy to minimise the
possible impact of the proposed fuel duty increase in August 2012.
Experts at Yorkshire Bank say it is important for businesses of all
sizes to stabilise their future fuel prices.
Although the UK Government recently postponed the proposed fuel
duty increase of 3p per litre until August 2012, fuel prices
continue to fluctuate and remain within touching distance of the
all-time UK record high of 136.9p per litre set in May 2011.
Data issued by the AA (20th December 2011) revealed the average
price for a litre of unleaded fuel in the West Midlands is now 132p
with diesel users facing an average price of 140.9p per litre.
Should prices remain at or around this level into 2012 it could
mean fuel prices approaching, if not exceeding, an all-time record
high come August's fuel duty increase.
However, businesses in Coventry and Warwickshire can prepare for
any fuel duty increase and fluctuating fuel prices by exercising a
fuel hedging contract. Fuel hedging brings stability to a
business's fuel purchasing strategy, allowing prices to be fixed
for a set period removing the element of uncertainty.
Stephen Cronin, managing partner at Yorkshire Bank's Financial
Solutions Centre at the Ricoh Arena in Coventry, said: "Even
businesses using just 50,000 litres of fuel a month should be
looking at the security provided by hedging, particularly during
times like these when speculation over fuel prices is
intense.
"Should the proposed duty increase go ahead in August, a
business with this level of fuel consumption would be facing
additional costs of £1,500 per month.
"Businesses should be taking this opportunity to review their
fuel purchasing strategy and budgets. The obvious advantages of
fuel hedging are the benefits of removing guess work from budgeting
and relieving worries about possible sharp increases in fuel prices
affecting cash flow."
The hedged fuel prices relate to the daily rates quoted by the
Platt's Index, which is a source of benchmark price assessments for
commodities like fuel. This hedged price is agreed at the start of
the partnership between the company and the bank and will not
deviate with any changes in the market price over the term of the
contract.
Stephen said: "While average UK petrol prices have dropped from
their record high of 136.9p per litre in May there is no guarantee
that the downward trend will continue. The elevated prices of
mid-2011 arose due to a combination of volatile factors, including
unrest in the Middle East and economic uncertainty in the
established high fuel consumption countries.
"Both these factors are still very much in play so it remains
important for businesses of all sizes to stabilise their fuel
purchases and be in a more secure position to manage their
business."