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Will the diesel fuel price drop encourage company car drivers back to the diesels?

diesel fill shutterstock_7169236
Last month 27,000 fewer diesel cars were registered compared with November 2016

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4 January 2016

Who’s the real winner in the fuel price drop

Don’t forget! Of every £1 per litre

  • 60p is fuel duty and
  • about 16p will be VAT
  • So the biggest winner is the Chancellor.

GREAT news for all small business and SMEs: the diesel fuel price has dropped below £1 per litre at four supermarkets – Morrison’s, Asda, Tesco and Sainsbury’s – giving a real boost to the start of 2016.

What a welcome beginning to the year!

In particular this is fabulous news for trades and small van fleet operators, as it pushes down their daily operational costs.

The Freight Transport Association’s deputy chief executive James Hookham said today: “We need to see the wider fuel market become more responsive to ever lower oil prices.  Today’s announcement by leading supermarkets is good news for commercial vehicle operators.”

But there’s a wider implication for small businesses operating company cars. Fewer are choosing diesel company cars at the expense of alternative fuel choices: hybrids, electric vehicles and so on.

Steve Jackson, chief car editor at Glass’s, noted in his January editorial: “Diesel market share during November fell to 51.2%, compared to 51.3% for November 2014. This continues the downward trend in the diesel market share year-to-date, with a fall to 48.4% of the market compared to 50.0% by the end of November 2014.”

Fuel price 99p 04 Jan16 crop

With the market share for petrol static, Steve pointed at that: “Alternative-fuelled vehicles continued their growth trend at the expense of diesel, growing 8.6% during the month and represent an overall 2.8% market share, compared to 2.8% for January to November 2014.”

Clearly, diesels are taking something of a walloping at the moment, not least because of the combined effects of the government’s push for clean air and the VWgate emissions scandal.

But will diesel start to make a comback with these fuel price drops? I mean, my Audi A6 is doing not far short of 50 miles to the gallon for a cost of £4.50. That’s tempting stuff.

More to the point, will the fuel price drops continue?

I was speaking to a friend of mine over the Christmas break who is a director of an engineering firm that supplies the oil industry. The outlook, he said for his firm, was bleak. The oil price drop was making it more expensive to take oil out of the North Sea than to sell it.

His opinion was that OPEC, the Middle East-dominated organisation for the exportation of petrol, would continue flooding the market with oil to wrest back control of fuel prices it had lost to the US with the States’ reliance on its own shale production.

It’s an interesting arm wrestle. So we can expect to see falling oil prices for sometime then.

So what should business car managers do?

Is diesel dying?

Hardly.

Diesels are brilliant for high mileage drivers, let’s not forget. Good on economy, good on running costs, good on company car taxation.

But with the growing availability of fit for purpose alternative fuel vehicles, and the increasing fuel efficiency of petrol engines, there are more choices out there that are cost effective to run, particularly for lower mileage (say sub 10,000 miles per annum) drivers.

And, at some stage, the price of fuel will increase.

My advice would be to consider what the car use is for – high mileage staff will no doubt still require diesels because these are the most efficient for their needs.

But for lower mileage staff, a hybrid, plug-in hybrid or an electric vehicle would do the trick nicely.

In other words, one size does not fit all. Best advice is to get your car provider – leasing company, dealership or leasing broker – to provide you with some clear pointers on the way to go. They will be able to provide the expert guidance for the correct mix to your company car make up.

And make sure you’re not pouring money down the drain with ‘free fuel’ for company cars – see Fuel’s a quid a litre – so why are you paying £3?

Audi A6 diesel
Who can complain at around 50 miles motoring in an Audi A6 diesel for fuel costing £4.50

 

 

 

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