Fleet News

Iraq war fears hit diesel fleets

GROWING fears of a new Middle East war could mean British fleets which invested billions of pounds in diesel technology will see expected fuel savings wiped out by soaring pump prices.

Commentators have predicted an increase of up to 20 pence per gallon for diesel, which would add £10,000 a year to the fuel bill of a 100 vehicle diesel fleet, with each vehicle covering 20,000 business miles a year.

The increase will come as a blow to fleets which have switched from petrol to low emissions diesel cars, in a bid to lower drivers' benefit-in-kind tax bills under the new carbon dioxide-based company car tax regime.

Sales of diesel vehicles to fleets have soared this year and are currently 47.8% higher at 187,125 for the year to the end of July.

But concerns that the United States is heading into battle with Iraq, despite international opposition, is pushing up diesel fuel prices, firstly through uncertainty over future oil supplies if there is conflict in the oil-rich Middle East, and secondly through stockpiling of diesel for tanks and other military vehicles required for any campaign.

Ray Holloway, director of the Petrol Retailers Association, said: 'You cannot talk about conflict in an area of the world where 40% of supplies come from without expecting there to be an impact on fuel prices.'

The problem is worsened because the crisis comes at a time of increased demand for fuel, with colder weather approaching in Europe. 'In the past two weeks, there has been evidence of increased costs for petrol and diesel and there is good reason for diesel prices to go up faster than petrol, as this is a traditional time of high demand and low supply,' added Holloway.

The increase has been exacerbated by a fall in the value of Sterling against the Dollar, pushing up prices for imported fuel.

Although diesel cars use less fuel, they often carry a price premium, meaning they need to cover tens of thousands of miles to recoup the investment.

Diesel is already more expensive than petrol and any increase in the differential will make it harder to claw back the extra cost of diesels through savings.

Louise Dickinson, director of ARVAL PHH Business Solutions which operates the AllStar fuel card said: 'If there is military action, the likelihood is that we will see oil prices rise.

'What this could mean for fleets is a worrying increase in petrol and diesel prices. Fleets which have shifted to diesel vehicles could be hit hardest. Any long-term increase in diesel prices will result in higher fleet costs as the benefits of better fuel economy are eroded, impacting on companies that have already paid a premium for the vehicles themselves.'

Washington has been pressing for action to topple Iraqi leader Saddam Hussein before he can acquire nuclear weapons or restock his military arsenal, following its 1990/1991 invasion of Kuwait.

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