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Falling fuel price is a little good news among the gloom

30/03/2020 by Mark Schneider in Fuel Cards

For businesses right around the world, it’s the perfect storm. In the midst of the deadly coronavirus which is killing people and locking down cities all over the world comes a brawl within OPEC that sees the oil price plunging and stock markets crashing to lows not seen since the GFC in 2008.

Well it may be a perfect storm, but it’s an ill wind that blows nobody any good. While many businesses face an uncertain future in this economic maelstrom, around the boardroom of ABC Tissue the smiles must be a kilometre wide. ABC Tissue is Australia’s biggest toilet paper maker and its products are continuing to fly off the supermarket shelves as soon as they can fill them in the Great Crazy Toilet Paper Panic of 2020. Production has been cranked up to the max with extra lines and extra shifts in response to this bizarre outburst of consumer behaviour that makes no sense whatsoever.

With the perfect recession-proof product, 57% of the toilet paper market and a buying frenzy, can things get any better for ABC Tissue right now? Well yes as it turns out, because that oil price plunge has cut the cost of running its 100-strong truck fleet by reducing their fuel price.

I’ve never understood why a sudden drop in the OPEC oil price sends the share market south and is seen as unequivocally bad news for business confidence. Sure, the price of oil is seen as a sort of proxy for the state of the global economy. When the price goes down it can indicate lower demand for oil and lower economic activity all round. I get that. But, and it’s a big but, how can lowering the running costs of fleets by reducing their fuel costs be a bad thing for business? That’s the silver lining in this dark economic cloud.

OPEC stoush

The OPEC stoush between Saudi Arabia and Russia has seen the crude oil price drop by half from the price at the beginning of this year. So cheaper prices at the bowser then? Well yes!

Lower OPEC crude oil prices are through the supply chain which has resulted in lower pump prices.

And there’s another factor at play, the falling Australian dollar which makes oil and everything else we import more expensive. The dollar has fluctuated quite a bit affecting fuel prices.

“The ready-reckoner is that every US$1.00 a barrel fall in the oil price leads to a 1.0 cent fall at the petrol bowser, Commsec’s chief economist Craig James wrote in a note to Commsec clients.

“Provided the Aussie dollar is reasonably stable, motorists may be able to look forward to filling up for nearly $1 a litre.

Falling prices, good news

We’re clearly entering a prolonged period of economic turmoil that threatens to end Australia’s long, long run of economic growth. No one’s pretending that’s good but falling fuel prices at least promise to alleviate a little of that economic pain for businesses relying on fleets. It will also greatly benefit businesses, like ABC Tissue, that are essentially immune to recessions.

There’s a little bit of good news, too, in the form of electricity prices. They’re predicted to fall in most Australian states over the next three years as increasing supplies of cheap renewable energy come on line. That’s another positive for households and businesses who’ve been putting up with some of the highest electricity prices in the world.

Whatever price for petrol and diesel finally emerges from the OPEC brawl there’s one sure-fire way to guarantee lower fuel prices every time you fill up. A Fleetcare Fuel Card is the smart way to enjoy discounted fuel from fuel stations across the nation along with the accounting convenience of monthly billing and streamlined reporting.

Doesn’t it make sense to lighten your administrative load while reducing your fuel bill at the same time? For further information contact Fleetcare today on 134 333.

For running updates on Coronavirus fleet news please visit our dedicated Coronavirus Fleetcare page.

IMPORTANT NOTE - This content is current as at 14 May 2020 and provided for information purposes only. The information may not be suitable or appropriate for your organisation’s operations and needs. As such, please undertake your own independent assessment(s) and take into consideration any specific government laws and guidance. Response and advice regarding Coronavirus is changing rapidly and it is important that you keep up to date with all relevant information issued by the Australian Government.

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