Expensive alternative fuel vehicles

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study carried out by the Grant Thornton International Business Report (IBR) found that one in four business leaders are either using or are considering adopting alternative fuel vehicles. Unsurprisingly the most cited reason for considering alternative fuels was cost. With Brent Crude oil currently at $108 per barrel and the IMF warning that prices could double by 2022, businesses see fuel as a key area for potential savings.

At a recent event organised by 4C, participants admitted that they had begun seriously considering the possibility of adopting biofuels. However, despite a certain level of enthusiasm for alternative fuels there is concern over the cost and performance of a newly implemented, alternative fuel fleet. Prices for these vehicles remain high and their output is not yet on par with that of petrol fuelled motors. It will be some time yet before adopting these vehicles is universally cost effective.

Preparing for High Prices

4C has modelled the potential impact of fuel price increases on the supply chains of several major companies and found dramatic variations in how they are affected. Some businesses were set up in such a way as to mitigate any rise in cost whereas others would see their margin severely affected. Companies which operate a centralised inventory business model are particularly at risk.

With fuel costs unlikely to stop rising and customers unwilling to bear delivery costs, suppliers need to begin implementing or fine tuning contingency plans. Alternative fuel vehicles, an increase in depots and reducing the frequency of deliveries, are all potential solutions which businesses need to begin looking at.

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