Mr. Aidan Flynn:

I wish the committee a good afternoon. My name is Aidan Flynn, chief executive of the Freight Transport Association of Ireland, FTAI. The FTAI is a not-for-profit membership trade association for the Irish freight, passenger and logistics industries. We welcome the opportunity to present to the Joint Committee on Transport and Communications on the topic of the rising cost of fuel at a time when fluctuating fuel prices are having a significant negative impact on businesses, which is feeding into increased inflation to consumers.

Ireland's supply chain and passenger service sector must be protected from sharp and spiralling increases in fuel costs. The volatility in the fuel markets was evident in the final quarter of 2021 and has been growing in intensity since. Since October 2021, the European Commission put in place the legal framework that enables the EU and its member states to take action to address the effect of sudden price fluctuations due to the increased spike in energy costs, attributed at the time to increased energy usage spikes due to global economic recovery. Two of the main recommendations were to provide temporary, targeted reductions in taxation rates for vulnerable households and to provide aid to companies or industry in line with EU state aid rules.

We welcome interventions to date such as the 15 cent reduction in excise duty on diesel and the emergency measure of the €100 grant per vehicle for vehicles listed on a road haulage operator licence. The question must be asked, however, as to why the coach and bus sector and the own-account sectors were excluded from this emergency provision. The Government must become more flexible and proactive in dealing with the fuel crisis we are experiencing at the moment. It has taken until the eleventh hour, some five months after the European Commission’s intervention, to see action by the Irish Government, which is frustrating for all in the transport and logistics sector. We need a dynamic and flexible approach to deal with exceptional circumstances.

In the 2021 FTAI submission on the ten-year haulage strategy to the Department of Transport, we suggested that a subgroup of the Government task force on emergency planning should be created to have representation from the freight distribution and logistics sector as we deem it essential in ensuring comprehensive preparations for, and response to, all emergencies. We submitted that this subgroup should include the Department of Transport and key stakeholders within the logistics sector, and that the subgroup should commence work immediately and form part of the national emergency planning in the event of future pandemics as well as, for example, disaster planning around fuel shortages and natural disasters.

Having dealt with the emergency brought about by Covid-19 and the consequences of Brexit, the pressures on the freight distribution and logistics sector are again intensifying due to the increases in energy prices, evidenced by the volatility of the price of a barrel of oil, which breached $140 per barrel in an intense week of trading recently. It has since decreased in price; I think it is $117 today. However, the average price per barrel of Brent oil is currently approximately $97 per barrel. To put this in context, in March 2021, the average price of a barrel of oil was $65; a 48% differential.

Wildly fluctuating fuel pricing, while not a regular occurrence, creates panic and unnecessary uncertainty in the market for both the consumer and essential service users. It is critical that essential services are ring-fenced and protected from such volatility. Recently, transport operations were limited to the volume of product they could purchase; not because of supply issues per se but because of the hourly volatility in price fluctuation. This unpredictability feeds uncertainty around security of supply and availability of product at affordable prices.

Commercial fleet operators come in many guises, operating across all industries including haulage, manufacturing, retail, warehouse and distribution, construction, private and public passenger transport, security, telecommunications etc. Currently, there are more than 40,000 Irish registered heavy goods vehicles greater than 3.5 tonnes. Of that number, 21,437 vehicles are included in the 3,812

road haulage operator licences issued by the State. The average-size haulage operator has five and a half trucks.

The own-account HGV operations are identifiable as being involved in the movement of their own goods, not for hire and reward, such as fuel distribution, retail distribution, local authorities, waste management services and so on. There are 1,542 large public service vehicle, LPSV, licensed operators in Ireland, with a total of just over 12,000 coaches and buses in the fleet. This is an average of 7.79 buses per operator. Understanding the size of commercial fleets, including the differentiation between the haulage sector and the own-account sector, is important in aiding our understanding of the necessary supports for mainly small to medium-sized businesses without distorting the competitive forces that deliver efficient and profitable logistics services.

Benchmarking operational costs is a key ingredient in aiding businesses in our industry to develop robust business plans that support decision-making and enhance profitability and competitiveness. The FTAI publishes an annual report called the Manager's Guide to Distribution Costs.This is an industry-wide survey examining the costs associated with personnel, operational, maintenance and fuel costs of commercial fleet operators in the haulage and logistics sector.

According to this guide, fuel accounts for more than 41% of operational costs for articulated vehicle fleets and just under 25% of rigid vehicle costs. The most recent report identified the average fuel cost per kilometre at 33 cent at a time when the average price per litre was €1.33. We have seen the price of a litre of diesel increase significantly by more than 40% in the past 12 months. This is having the impact of increasing that cost per kilometre to 46 cent. This increase is crippling for those who do not have fuel surcharges built into their contracts but also is damaging to freight distribution cash flow, particularly when the curve of fuels prices has a constant upward and steep trajectory.

The FTAI has repeatedly advised the Government to review the current diesel rebate scheme to make it more accessible and fit for purpose to alleviate some of the pressures on the haulage and public service vehicle, PSV, sector. There are challenges with the current system with less than one third of qualifying operators actively participating in the scheme. This scheme must also be broadened to include the own-account sector, which is responsible for most of the national retail and food and energy supply services distribution.

Currently, the rebate scheme provides a 7.5 cent per litre rebate, which is payable three months after the fuel has been purchased with certain terms and conditions applying. The scheme should be made more efficient to support cash flow for operators and, particularly in exceptional periods such as we are currently experiencing, should be flexible enough to facilitate monthly claims and payments. It should also be renamed and extended to include alternative fuels such as compressed natural gas.

Of course, we are not here today to suggest that the Government must do everything to provide subvention for our industry. We want to highlight the work that is being done by our members and others in operating in a professional manner while striving for recognition. Solidarity within the supply chain and passenger services is also essential in protecting the sustainability and viability of essential service providers. It is imperative that the burden of increased costs is shared, thus mitigating the risk to service provision, developing fair competition and, critically, security of service.

Why, for instance, should haulage operators be fully responsible for the increasing rate of carbon tax? Currently, carbon tax accounts for 8.5 cent per litre of diesel. This is increasing to 11 cent in May and will increase year-on-year until it is 71 cent per litre in 2050. The purchasers of these services have an influence on the environmental impact through the contracting of their freight distribution services.

It must become the norm that these costs are considered in a professional and engaging manner where all parties understand the realities and pressures of operating effective and efficient logistics and passenger services. Developing more transparency and guidance for industry on fuel pricing will support and aid this reality. The quarterly diesel repayment rate is calculated using the national average purchase price. The Central Statistics Office, CSO, provides this information. It is this rate that is referenced by the Revenue Commissioners.

The CSO could publish more frequent updates on fuel pricing that could become the reference de facto for fuel escalator agreements. The public sector should lead by example in support of fuel escalator arrangements and guidance should be available to all to support progressive and fair contract arrangements that will ultimately spread the risk of fuel inflation and share the burden of increased carbon taxes.

Since 2014 the FTAI has promoted, and in recent years run, a CO2 reduction programme. This is our TruckSafe green certificate programme, which is funded through the energy efficiency obligation scheme and regulated by the SEAI. This recognises hauliers and commercial fleet operators for their performance improvement based on primary measured data submitted quarterly. To summarise the results of the overall programme for the period 2014 to 2020, we have avoided 89,000 tonnes of CO2 emissions, more than €750,000 has been paid out to licensed operators for demonstrating reductions in fuel consumption and there have been more than €56 million in savings from avoided fuel use.