Effect of recent fuel price increases on the transporting industry
For the normal person that travels around town, to and from their workplace, the impact of a fuel price hike can easily be felt. Now, when we think of how large of an impact simple price increase can have on major transport companies.
The recent drop in the fuel price has had South Africans smiling. For quite a while we were the victims of multiple price hikes. Luckily the burden got a bit lighter in the past few months. As we all know, these fluctuations in the fuel price, has had an impact on the transport industries.
The companies that specialize in transporting goods from one large city to another, determines their prices in accordance with the current prices for fuel. For this reason, the increase in the fuel price will have an effect on the customer of the transporting company, not directly the transporting company itself.
You might think all is well then, but that is not the case. In order for transporting companies to remain in business while still making a profit, they will have to quote more each time that there is a dramatic increase in the fuel prices. This is the part that will have an effect on the transporting company. Each time that the fuel prices go up and they increase their prices, they stand vulnerable to loosing clients. Not all clients will be able to pay higher amounts.
Luckily, with the recent decrease in the amount of fuel have brought relief for the transporting companies, as well for their customers. People do not always realize the amount of fuel that is needed to run a large truck from one city to another. These big engines can use up to one liter of fuel to travel a mere two kilometers. That is an enormous amount of fuel.
For instance a truck needs to travel to Johannesburg from Cape Town, it will need to travel about 1600 kilometers to Johannesburg. The truck then also needs to go back from where it came from, so in total that will be 3200 kilometers quoted for. When you do the math, you will find that about R16 800 of fuel will be used for the entire trip. Even an increase of just R1 in the fuel price will have to affect that the transporting company will need to pay R1 600 more for the fuel. Then you still need to bring into consideration the maintenance of these trucks, salaries and costs involved in running a business.
Some of these companies appoint their drivers on a commission basis and others have a set salary. In some instances, these methods can be to the advantage and disadvantage of a transporting business’ profits.
When the price of the fuel only increases by a few cents, there are not usually a difference in the price of the fuel. It is only when the price of the fuel keeps increasing that there will be a change made in the pricing tariffs of the transporting company.
In the transporting industry, you either maintain a small fleet of about 10 trucks or a large fleet of about 140 trucks. A part-owner of a transporting company mentioned that it is difficult to run a transporting company that have about 50 trucks. When you are in the transporting industry, it is better to have either a small amount of trucks, or a large amount of trucks. When you fall in the middle of that, managing all your accounts and clients will become a problem.
The transporting industry is probably one of the most important industries in the country. Without it, there will be immense troubles in getting food and other necessities to towns that are located far from the major producing cities. So before you start to point fingers, remember that transporting companies are also just companies that are trying to make a living.