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Maximising fleet fuel efficiency for Australian transport operators

The price of fuel is a topic that often tops the list of considerations for transport companies – and rightly so. Especially in Australia, our distances are no joke, and small fluxes in fuel cost can add up to significant expenses. While sustainable and EV options are on the horizon, operators need to protect their bottom line and optimise efficiency right now, and that means smart solutions for managing fleet fuel.

In this article, we will delve into key concepts such as fuel levies, their calculation methods, and actionable strategies to slash fuel costs while enhancing overall fleet performance.

What is a fuel levy?

Some people don’t understand what a fuel levy is and think it’s just a way for transport companies to profiteer, but this is incorrect. Transport providers’ most variable cost to do business is the changing price of fuel, and put simply, fuel levies are a way for the transport industry to calculate and include fuel cost considerations in their customer invoicing.

Providers often have a base rate for performing deliveries (base cost) and a variable rate that is applied as a percentage of the base cost that can be adjusted up or down which is based on the ever-changing cost of fuel (fuel levy). This is also important to have built into their rates because contracts can span many years and the price of fuel can significantly change month-to-month.

Why do transport companies charge fuel levies on transport deliveries?

Fuel levies perform several valuable functions for transport providers:

Cost recovery: Fuel constitutes a significant portion of operational expenses for transport companies. By charging fuel levies, these companies aim to recover the actual costs incurred due to fuel price variations.

Price stability: Fluctuations in fuel prices can severely impact profit margins. Implementing fuel levies allows companies to maintain stable pricing for their services, fostering trust and predictability for customers.

Operational continuity: Fuel levies help transport companies mitigate risks associated with fuel price volatility. They can plan and budget more effectively, ensuring uninterrupted service delivery even during market fluctuations.

The latest TransEco Road Freight Cost Indices report – a popular guide used by transport companies – shows that as at the December quarter 2023, fuel prices have eased slightly by 4.8% but that the diesel fuel excise rose to 48.8 cents per litre, and that it was expected to rise again. These numbers are constantly fluctuating, and though it’s time consuming, it’s essential that operators keep a close eye on them.

However, it’s important to note that fuel is just one of the numerous shifting costs that transport companies must monitor. The TransEco quarterly report also shows the others, including labour, admin, tyres, maintenance, rego, and insurance. Calculating actual costs considers all these expenses, and a fuel levy charge streamlines tracking the most variable one.

Thus, the fuel levy acts as a mechanism to pass on the rising (or falling) costs of fuel to customers. Using it helps transport companies maintain stability in their pricing structures despite volatile fuel markets, thereby ensuring sustainable operations.

How is a fuel levy calculated?

Every organisation will have a different way of calculating their fuel levy, as it involves several factors, including fuel consumption rates, distance travelled, fuel price indices, and operational overheads. Let’s take a closer look at the typical steps involved in determining a fuel levy:

Fuel consumption analysis: Transport operators analyse historical fuel consumption data for their fleet. This data helps establish average fuel usage patterns across different vehicle types and routes.

Fuel price indices: Monitoring fuel price indices such as the one from TransEco, the Platts Index, or local fuel price benchmarks is crucial. These indices reflect market fluctuations and serve as a reference point for adjusting fuel levies.

Distance and payload consideration: The distance travelled and payload carried also influence fuel consumption. Calculations may account for factors like vehicle load, route efficiency, and driving conditions.

Operational Costs: Besides fuel, operational costs such as maintenance, labour, and regulatory compliance also impact overall pricing strategies. Fuel levies may partially cover these expenses as well.

Periodic Review: Regular reviews and adjustments to fuel levies are necessary to align with changing market conditions. Transparent communication with customers about levy adjustments is also essential for maintaining business relationships.

On a practical level, the fuel levy that is usually applied to transport deliveries is a pretty simple calculation: Base Rate ($) x Fuel Levy (%) = Freight Charge.

To put it into practice: if your total cost basis for fuel was $100 to run your operation in February 2024, and usage of fuel remained exactly the same in March 2024, however the cost of fuel per litre increased resulting in a total cost basis for fuel of $126, then you could consider a fuel levy increase of 26% between February 2024 and March 2024.

Tools like this fuel levy calculator or this fuel levy chart can be useful, though as we mentioned, the ultimate rate calculation will consider multiple factors. Some companies might have a high rate with a low fuel levy or vice versa, but everyone has their fuel levy set at around the same price. In this way, it’s clear that using a fuel levy is not a profiteering process, but a way of fighting against costs.

Now, let’s look at ways in addition to using a fuel levy to manage your fuel efficiency.

Fleet fuel efficiency: use smart solutions to cut your fuel costs

There are many actionable strategies that Australian transport operators can implement to reduce fuel consumption and enhance fleet fuel efficiency:

Invest in fuel-efficient vehicles: Upgrading to modern, fuel-efficient vehicles can yield substantial long-term savings. Features like aerodynamic designs, low-rolling-resistance tires, and advanced engine technologies contribute to reduced fuel consumption.

Optimise route planning: Efficient route planning minimises unnecessary mileage and idle time, leading to fuel savings. Use GPS technology and route optimisation software to identify optimal routes based on traffic conditions, road types, and delivery schedules.

Driver training and monitoring: Conduct regular training sessions for drivers focused on eco-driving techniques, such as smooth acceleration, steady speeds, and timely gear shifts. Implement driver monitoring systems to track fuel consumption metrics and provide feedback for improvement.

Maintenance and servicing: Well-maintained vehicles operate more efficiently. Follow manufacturer-recommended maintenance schedules, address mechanical issues promptly, and keep tires properly inflated. Regular servicing ensures optimal engine performance and fuel economy.

Use of telematics and IoT: Leverage telematics systems and IoT (Internet of Things) devices to gather real-time data on vehicle performance, fuel usage, and driver behaviour. Analyse this data to identify areas for improvement and implement targeted interventions.

Load optimisation: Efficiently managing cargo loads reduces vehicle weight and improves fuel efficiency. Balance loads appropriately, avoid overloading vehicles, and consider consolidating shipments to maximise use of space.

Alternative fuels and technologies: Explore options such as biodiesel, compressed natural gas (CNG), or electric vehicles (EVs) depending on your operational needs and infrastructure availability. Adopting alternative fuels and technologies can reduce reliance on traditional fossil fuels.

Supplier negotiations: Build strong relationships with fuel suppliers and explore bulk purchasing or contractual agreements for competitive fuel pricing. Monitor fuel prices regularly and take advantage of favourable market trends.

Data analytics and benchmarking: Leverage data analytics tools to track fuel consumption trends, identify outliers, and benchmark performance against industry standards. Data-driven insights enable informed decision-making and continuous improvement strategies.

Promote fuel-efficient practices: Foster a culture of fuel efficiency within your organisation through employee awareness campaigns, incentives for fuel-saving behaviours, and recognition programs for top-performing drivers and teams.

By combining these strategies with proactive monitoring and continuous improvement efforts, Australian transport operators can effectively manage fuel costs, enhance operational sustainability, and stay competitive in today’s dynamic transportation landscape.

Manage your fleet fuel efficiency with ease

Maximising fleet fuel efficiency involves embracing innovation, leveraging data-driven insights, and fostering a culture of sustainability and operational excellence across your organisation.

In addition to taking steps to improve your fuel use, employing smart technology to manage your fuel levy can save you time and resources. The GoDesta Fuel Levy function allows you to enter your fuel levy and have it be automatically applied across your client accounts and subcontractor payments accordingly. This eliminates time-consuming manual entry and reduces errors, protecting your profit margins.

GoDesta makes it simple to apply your fuel levy to your transport deliveries. Discover more here.

GoDesta: Growing Transport Faster, Smarter