Opinion: Will 2024 be more expensive than 2023 for fleets?

By Paul Holland, managing director for UK/ANZ Fleet at Fleetcor

The cost of living has increased sharply across the UK with various factors from economic forces to geopolitics at play. 

While that impacts our personal spending decisions, it has a significant knock-on effect for businesses too, and none more so than those managing fleets.

With pricing under scrutiny, what can we expect to spend on our fleets, which means on their fuel, electricity, or the vehicles themselves this year, and will businesses be more, or less out of pocket as a result?

Fluctuating fuel costs

As we entered 2023, the price of diesel was beginning to fall following highs in 2022 at an average of 174p per litre while petrol, following roughly the same trajectory, was at 151p.

Aside from a brief blip in October, prices carried on falling, and by the end of the year were at 152p and 144p respectively.

During 2024 will we continue to see prices fall or will the volatility of the last two years continue? Without the luxury of a crystal ball, I recommend expecting the unexpected, and plan for unplanned spikes in price.

The recent Spring Budget saw fuel duty frozen for a further 12 months, extending the 5p fuel duty cut and cancelling any increase with inflation, which is welcome but the reality is that the average driver will save only £50 per year as a result.

There have also been multiple global events impacting the price of petrol and diesel, with wars still going on in Ukraine and Gaza, and Russia retains significant antagonism towards the west.

Assuming no others contribute to instability, there is a feeling that fuel prices may only rise slightly through the year.

One factor is that Saudi Arabia has cut production of oil, and other OPEC+ members have lowered output targets, which has the effect of tightening supply and usually that means higher oil, and therefore fuel, prices.

Indeed, the US Energy Information Administration says it thinks oil prices should rise next year, as global demand for oil in 2024 exceeds supply. How much, however, is the ultimate question.

Electricity prices: increased competition equals increased opportunity

Electricity prices are increasingly of interest to business fleets. While these costs also fell in 2023, disrupted supplies across Europe due to the war in Ukraine mean inflation and higher gas prices, so it is likely they may not fall in 2024 much below where they are now.

The Office for National Statistics reported that inflation was 4.2% in January 2024, even though in the year to December 2023 electricity prices fell by 15.4%.

However, Ofgem, the energy market regulator, increased its price cap on domestic customer bills by 5% from January 1, 2024, and analysts predict fluctuating prices for electricity and gas throughout the year.

It’s also important to mention the increased competition in the charging sector. The number of low-cost specialist tariffs for home charging, and the number of public rapid charging hubs is likely to more than double in number in 2024. The consequence of this is more choice for EV drivers, and increased opportunity to access lower prices.

Are vehicle prices stabilising?

Prices of new cars and vans have risen markedly in the past few years. But we may see a change this year, says Cox Automotive in its 2024 Insight Report, which suggests that there will be a period of stabilisation in the automotive sector generally, followed by a notable rise in registrations in successive years.

One area that was likely to hit electric vehicle costs was the end of the post-Brexit agreement on tariffs for non-EU battery and parts. However, the European Commission and the UK have agreed to extend the current rules until 2027, avoiding major prices on many models.

Doing this is a win for motorists, the economy and the environment. Mike Hawes, SMMT chief executive, said that maintaining tariff-free trade in EVs will ensure consumers retain the widest and most affordable choice of models at a time when we need all drivers to make the switch. I couldn’t agree more.

Fleet efficiency

While inflation continues to hit the UK economy, it seems the cost of running a fleet is going to be affected by some pricing pressure. However, the outlook is far more positive than previous years and fleet costs in 2024 look more stable.

There are always ways to ensure a fleet is run as cost effectively as possible, such as buying fuel and electricity at the lowest prices when on the road, or using home charging to lower your EV charging bill.