Woolworths has nearly tripled its freight fuel levy surcharge since the onset of the Iran war, as diesel costs continue to rise. The company's logistics arm, Primary Connect, which handles freight for over 1,000 grocery producers, has increased the fuel levy in metro areas from 17.47% to 19.88% and in regional areas from 44.20% to 50.30%. These adjustments follow a sharp rise in diesel prices, which has made it economically necessary for freight providers and retailers to recover additional operating costs through higher fuel surcharges.
Experts note that such increases are common in freight markets to manage fuel-price volatility. Professor Rico Merkert from the University of Sydney explained that transport operators often use adjustable surcharges rather than renegotiating contracts frequently. However, the significant jump, particularly in regional areas, where the levy has surged by over 172% since March, raises concerns about the broader impact on the supply chain.
Industry specialists warn that the increased costs are likely to be shared across the supply chain, ultimately affecting consumers. Medo Pournader, a senior lecturer at the University of Melbourne, predicted that both suppliers and consumers will bear the brunt of the higher fuel surcharges. Meanwhile, Professor Ben Fahimnia from the University of Sydney cautioned that continually passing rising logistics costs back to suppliers is unsustainable, suggesting that Australian consumers will eventually face higher prices at the checkout.
Rising fuel prices have already contributed to Australia's inflation rate, which hit 4% in August. Transport was the second-largest contributor to this figure, driven by higher automotive fuel prices. Reserve Bank governor Michele Bullock recently warned that businesses may pass on these higher fuel costs if the situation persists, indicating potential long-term economic implications.