On Monday (9 March), the price of oil surged to above $110 (£84) for the first time since Russia’s invasion of Ukraine in 2022.

Recent oil price spikes are the crude oil market’s reaction to rising tensions in the Middle East. The threat of prolonged uncertainty surrounding the conflict could mean that we are to expect further spikes or elevated fuel costs for an unknown period. UK operators need to prepare for the impact of fuel price fluctuations and be aware of the impact this can have on operating costs.

Fuel usually represents one of the largest expenses for UK bus and coach operators. Any significant fluctuations in the cost of petrol and diesel could push operators already working on extremely tight margins to walk a dangerous line towards non-viability.

Industry voices have already made urgent calls for discussions with the UK government on the back of a 16.25% spike in bulk fuel prices seen this past week. They state that the spikes represent a serious risk to the viability of operators’ businesses, as well as serious risks to the wider national economy.

What can be done?

One way for UK bus and coach operators to remain operationally profitable in the current market could be to implement a fuel surcharge.

A fuel surcharge is a temporary, additional fee added to fares to account for fluctuations in fuel prices. It does not represent a fare increase, rather a cost-recovery mechanism to ensure that operators are covered in periods of significant fuel price volatility.

Since Covid and Brexit, a lot of operators have revised their terms and conditions to allow surcharges in events such as these, which should be your starting point. If your terms already allow this, then now is the time to rely on that clause to pass on the additional costs to your customers. If you do not have such a provision, then you may wish to review your terms to include such a provision to protect the business in the future. Many standard form conditions of carriage do not contain such a provision.

If you do not have such a surcharge clause and wish to implement charges on contracts already agreed with your customer, specific advice should be taken before doing so. Ultimately, a contract can be renegotiated, but that takes both parties to agree to the new terms.

How can it be calculated?

Operators can calculate the surcharge in several ways:

1. Percentage of total ticket price
2. Fixed amount per mile / per journey
3. A formula (published for transparency) linked to a recognised fuel price index

Industry examples of surcharge in use

Examples of operators in the logistics sector already implementing fuel surcharges include FedEx, UPS, and DHL. Logistics giant Yodel by InPost is currently operating a fuel surcharge system of 10.5%, which is linked to the consumer price of diesel fuel.

There is an opportunity for bus and coach operators to mirror this approach and implement cost-recovery mechanisms now, such as a fuel surcharge, which could be the difference between operators being on or off the road during this period of market uncertainty.