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.

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What Types of Fuel are Used in Freight?

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:

Fuel for Air Freight

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 for Sea Freight

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.

Fuel for Road and Rail Freight

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

The Fuel Costs Involved in Freight Forwarding

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 >

What Other Costs Contribute to Freight Charges?

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:

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.

How to Secure the Best Value for Your Freight

If you want all of the steps we’ve mentioned above to be handled in a single, smooth process, then you’ll need a freight forwarder. Aside from the insurance for your goods, which will still need to be procured by you, a freight forwarder can support you throughout your freight’s journey.

All you need to provide is the goods and the destination – from there, the freight forwarder can plot the best route, utilising their unique channels and knowledge of the industry to secure a journey for your freight that is both cost and time effective.

Cost Effective Freight Forwarding from Allegro

Freight costs for sea, rail, road, and air all include some form of fuel. This price of this fuel makes a large impact on your freight charges, so understanding the benefits of each type of freight and the fuels involved can help you to cut down costs while achieving your targets for delivery.

Rather than learning it all yourself, it’s most efficient and effective to utilise our knowledge to secure the best freight journey. At Allegro Freight Forwarding, we’re experts in global freight channels, meaning we can get your assets from A to B in the way that most closely aligns with your goals. Get in touch today to begin your cost-effective, hassle-free freight experience!

Find out more about the role of a freight forwarder >

Learn how integrating logistics and freight will help you plan for last mile delivery >

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