Many in the industry will be watching events in Iran with a combination of familiarity and dread. Conflict in a faraway land, well outside of the UK’s control, again threatens to tear up plans for the coming financial year.
The primary concern is fuel costs. Few who are exposed to daily or weekly variation there will forget the impact of previous wars. Oil price tracking data shows the recent peak for Brent crude at the time of writing to be US$118 per barrel, almost double the field of mid-February, although it has since fallen back to something around a midpoint of those.
One coach operator cites some bulk diesel quotes in excess of 150ppl plus VAT in week commencing 9 March. Others are well below that, and at least one fuel card was sub-130ppl at the same time. Such disparity is puzzling, another stakeholder notes.
If no rapid conclusion to the war in Iran is forthcoming despite suggestions that the end is already near, broaching the impact of such increases with clients – whether hirers or local authorities – will become necessary. Neither Donald Trump nor the Iranian regime are showing signs of backing down. Both sides appear to have longevity in conflict.
A supplier has already pondered the impact that fuel prices and conflict could have on the summer season for coach.
Will all bookers have the pockets for a surcharge if things continue? And how keen on travel to Europe will sensitive markets, such as visitors from the United States, be despite any war being thousands of miles away? But then again, how could the position also influence the interest of UK consumers in travelling abroad?
A slightly alternative view is given by another supplier who notes how strict adherence to quote expiry terms is already causing faster enquiry conversions. A three-day window is in place there – as is reservation of the right to pass on fuel costs to the hirer. Playing hardball is not ideal, they accept, but it may already be unavoidable.
As part of the predictable brinkmanship, the Iranian regime has suggested that oil could reach US$200 per barrel if the war continues. Other sources have suggested that US$150 is possible by month-end. US$110 was seen in the early days of the conflict in Ukraine. Equally, it seems that if resolution is reached, a rapid fall back to the norm may be possible.
In bus, where might a worst-case leave operators that cannot hedge their fuel spend and are fully exposed to the market while sitting against a backdrop of challenging margins and/or largely contracted work? Local authorities will be unwilling to entertain additional payments and various fare caps complicate some ability to recover costs via ticket prices.
Meanwhile, G7 nations debate whether to release 300 million barrels of stockpiled oil. Global consumption is around 100 million barrels per day. Any impact will be modest against the scale of price shifts already seen.
Rachel Reeves warns that inflation will likely rise, adding further pressure. At the time of writing, she had said nothing about the phased removal of the temporary 5ppl fuel duty cut that is due from 1 September. Pressure to change her position will gather between now and then if the conflict continues. RHA is already seeking such a backtrack.
No doubt the most difficult part of the crisis for all concerned is unpredictability. Perhaps the scale and pace of that so far is a metaphor for the immediate future. Equally, an end could come suddenly.
Some evidence suggests that high fuel prices can push a small percentage of car users to shared modes, particularly for longer journeys. But the current situation looks to be another where the hatches must be battened down. All that remains to be seen is for how long.
