No one can fail to notice the inexorable climb in fuel prices over the past two years.
Dramatic rises too.
When the team at Kinetic Demolition, Edinburgh, think back to two years ago, supermarket petrol and diesel dipped (albeit for a short time) to under £1 a litre, but now the new norm is £1.45 plus per litre and we’ve even seen £1.70 per litre on motorway travels.
For a leading Scotland demolition company, and for many other businesses, a 25% per annum increase in fuel costs has been a huge financial burden for us. We obviously use red diesel in our demolition equipment but that, like 99p fuel, is coming to a close.
Instead, in its place, HVO arrives – or Hydrogenated Vegetable Oil – which is twice as expensive as red diesel, although, we know, better for the environment.
What we’re saying though is that the rising costs of normal petrol, diesel and red diesel and its replacement with HVO is making our costs higher and, coupled with rising inflation, the present and future suddenly looks much more expensive for us in the demolition industry.
So how should any business manage rising costs?
You may say, it’s easy, increase your prices for demolitions and downtakings. We’ve got connections in other industries, like aluminium window fitting, where they are unable to honour a quote given 30 days ago as the raw materials have risen by £25 per day (we kid you not) and, coupled with labour and increased transportation costs, profit margins are wafer thin.
There may be some logic in the proposal quote strategy for any industry – not just the aluminium doors and window company or our Scottish demolition firm. The usual 30 days proposal structure may need a radical rethink across the board in all industries, given that costs rise daily.
A pertinent example of this law of supply and demand affecting prices is in cars. You know, we know, that cars, unless a collectable, depreciate rapidly. You buy a new hatchback and lose 20% of the value in the first mile. Keep it for 3 years and expect a 33% trade in value.
These are strange times.
The semi-conductor chip shortage, stemming from lockdown, has had a massive domino effect on new cars and commercial vehicles. Waiting lists for new cars, to buy or lease, are generally long and this has impacted on used values.
Instead of being on a downward slide, car and van values have climbed in the past year. You will know of family, friends and colleagues who’ve made a profit when selling a used car. Surreal, really?
There may be some environmental benefits too in this surge – if used car values are rising, it may deter many from buying new and looking long term at the future of EVs.
What we do know, at Kinetic Demolition, is that HVO, in place of red diesel, will bring green benefits, like a 90% reduction in CO2, but, with it, higher costs for us and our customer base.
One question for all of us, is this worth paying for?
We think so.
What about you?