Logistics costs are set to soar as violence in the Middle East sends oil prices to near record levels.
Prices have touched the $40 a barrel threshold in the face of renewed problems in the Middle East. On New York's Nymex exchange, the price of crude oil topped out at $40.05, finishing the day at $39.93.
The all-time high of $41.15 was reached in October 1990 after Iraq invaded Kuwait, and some analysts have predicted that prolonged skirmishes will take oil to that level and beyond in the next few months.
The rising cost of oil is driving petrol prices higher worldwide and the UK’s Freight Transport Association is alarmed at the impact on diesel prices and thus lorry operating costs.
FTA said that every 1 pence per litre increase in the price of diesel costs almost £500 per year to the cost of operating a single large articulated lorry, and in total increases UK industry's transport costs by £135 million per year.
The association has called for the Chancellor to support UK industry now by signalling that he will not impose the diesel duty increase of 1.9 pence per litre from September 1 announced in the 2004 Budget. This scheduled increase alone would cost UK industry £250m a year.
FTA chief executive Richard Turner said: “Fuel costs constitute a third of the operating costs for lorries in the UK. As such, increases in fuel prices impact quickly on the whole economy and raise the cost of both industrial production and shop prices to consumers.
“Taxes on UK transport operators are the highest in Europe - five per cent of the cost of everything we buy in a supermarket is straightforward transport taxation.
“Earlier this year FTA alerted the Chancellor to the potentially lethal effects on UK industry of the sliding dollar and the soaring oil market.
“The Chancellor is already enjoying a windfall income from the VAT he gets on increased fuel prices and he should therefore now help the transport industry by abandoning his plans for increased duty in September. Such an action would signal a genuine recognition that he appreciates that the world's fourth largest economy is delivered on the back of a truck. Sadly, this summer cost of operating those trucks is going up and up and up.”
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