The Impact of Fuel Costs on Freight Charges

Freight undergoes a vast series of procedures as it goes from your door to your customer’s. As such, it is normal to incur costs over the journey that change depending on a variety of factors. By considering these factors, you can reduce the overall costs of your freight’s journey. A cost that could make all the difference for your freight charges is the price of fuel.

At Allegro Freight Forwarding, we aim to create the best routes for your freight, which means we have a solid grasp of all the aspects that make up freight charges. In this article we’ll dive deep into fuel costs, outlining what types of fuel are used in freight, the fuel costs involved and their impact, and other costs you should also keep in mind.

Streamline your freight shipments today – contact our friendly team to get started!

The first step to understanding how fuel costs impact freight charges is by understanding what different fuels are used for the various freight channels. One common theme in the modern fuel landscape is environment, which means many modes of transport are moving over to more renewable fuel sources like electricity or biofuels. These fuels lower your carbon footprint, and often offer a lower cost as well.

With that said, here is a breakdown of the fuels used in the main freight channels:

Jet fuel is the primary fuel used for air freight. Even then, it can be broken down further into additional classifications. These include:

• Jet A – the primary air fuel used in the USA
• Jet A1 – the most common air fuel used worldwide, with a lower freezing point than Jet A. This fuel is interchangeable with Jet A, meaning aircraft that have been built to use one can use both.
• Jet B – a common alternative to standard fuels, Jet B has an incredibly low freezing point (-76˚C) which makes it an ideal choice for extreme climates and civil aircraft.

Another type of fuel used for aircraft is Aviation Gasoline, or AVGAS. This type of fuel isn’t really suitable for air freight, instead being used in smaller aircraft that will typically only house 1 to 2 people.

Biofuels, LNGs, electric power, and hydrogen all serve as emerging fuel sources for aviation. While not the most commonly used fuels, they present an opportunity for a more renewable solution to delivering freight via air.

Fuel that’s used for sea freight is known as “Bunker Fuel”. This actually refers to many different types of fuel, the most common of which being Diesel, Marine Gas Oil (MGO), and Heavy Fuel Oil (HFO).

Diesel is often used for smaller vessels, not quite offering the power that more specialised marine fuels have.

MGO is a more suitable fuel for many larger vessels, but can still fall short of even more powerful fuels like HFO – especially when it comes to shipping large amount of assets over extreme distances.

HFO is the best fuel source for commercial ocean vessels, providing a great amount of power at a relatively low cost. However, it is highly pollutant, and there are regulations which vastly limit the sulphur content and other harmful substances that it produces to reduce the environmental impact of sea freight.

Other types of fuel for sea freight include:

• Marine Diesel Oil (MDO)
• Intermediate Fuel Oil (IFO)
• Marine Fuel Oil (MFO)

Sustainable fuels are in use, but largely for smaller passenger vessels as there isn’t yet much infrastructure for freight ships to run effectively off these fuel sources. As such, until developments are made in environmentally friendly fuels, sea freight will continue to run off MGO and HFO.

The market for road and rail freight is a mixture between diesel, petroleum, and electric vehicles. In fact, hybrid vehicles that use multiple exist and are a great way to make the most of the advantages of each.

Rail freight can be broken down into four different fuel sources. According to the Office of Rail and Road’s 2023 report, these are:

1. Electric (70%)
2. Diesel (19%)
3. Hybrid (7%)
4. Locomotive (4%)

Additionally, 38% of rail route length in Great Britain are electrified, allowing for the use of electric rail craft across large stretches of the country.

For road freight, while diesel options have always offered high longevity at a low cost, electric options are becoming more and more viable. Major retailers like Volvo offer electric trucks which have various use cases and can be a great choice to deliver your freight even over long distances. Improvements to batteries and the efficiency of these vehicles will only increase their impact on fuel costs and the environment

Fuel makes up a huge percentage of the cost of shipping, making up most of the running cost of a vehicle:

• Air freight, though fast, burns fuel at a high rate which contributes to its premium pricing.
• Sea freight burns less fuel, but a cargo ship can still burn as much as 217 tons of fuel per day.
• Road and rail freight are often the most cost-effective for smaller shipments that need to travel via land, but numerous stops will be required for longer journeys and the efficiency will gradually decrease – often making it better to consider other avenues.

Fuel costs also fluctuate all the time. Recent rises to fuel costs affect consumers, impacting shippers as well. However, oil prices have remained fairly constant, which likely means other factors are affecting fuel costs such as demand, processing costs, and duty.

Refuelling also costs in more than just the fuel, as it adds to the time of the journey and takes up manpower to perform the refuelling process.

On the other hand, renewable fuel sources typically cost less, but can be hard to source. Since they’re less efficient for long journeys, especially in the case of electric vehicles, many additional stops may be required to deliver the freight – adding to the overall charges.

Find out more about costs for your freight with our article on freight container prices >

Fuel might make up one of the largest costs in running a vehicle, with the staff on board, repairs for the vehicle, and profit margins making up the rest, but there are also lots of other factors you need to consider when planning the cost for your freight. These include:

• Customs and customs brokers
• Handling
• Storage
• Import fees and tariffs
• Insurance
• Container cost
• Journey duration
• Admin time

The most costly thing for freight is your time. If you’re spending all your time planning your freight journey, there’s not much left for you to actually engage in your business ventures. Securing a way for your freight to be delivered without having to micromanagement will offer the best results for your freight, the charges involved, and your overall peace of mind.