As fuel prices continues to soar, perhaps now is the time to revisit the essential user rebate debate that surfaced when fuel prices soared throughout Europe in 2000.

In the past six months diesel prices have soared by an estimated 30 per cent, according to the Automobile Association. It is cold comfort for the haulage sector to learn the euro's appreciation against the US dollar has had a softening effect on the increases, and that we could have been looking at a 50 per cent increase but for the relative strength of the euro.

For the foreseeable future, the cost of crude oil will remain high. Nobody is quite sure what will happen when the war in Iraq is over. It is unclear if OPEC will take up the slack and adopt a pump at will policy and abandon its present quota system, which has contributed significantly to the current high prices.

It is also unclear whether Iraq's oil infrastructure will be intact when the hostilities have ceased. In the coming months the cost of crude oil will be a hot topic on everybody's lips.
At home consignors are refusing to discuss meaningful rate increases, or the possibility of introducing a temporary fuel surcharge. Prospects for the road haulage industry have never looked bleaker.

Hauliers have been going to the wall at a rate of knots on the back of the economic slowdown, which has hit practically very sector of the economy. By the end of the year there will be many more casualties.
Most industries are now in cost cutting mode because of spiralling inflation, the appreciating euro and the general slowdown in the global economy. Many companies are already scaling back their activities in an attempt to ride out the current economic difficulties.

In the current economic climate, where cost cutting is the order of the day, it is easy to understand why industry is reluctant to sit down with their transport suppliers to discuss rate increases.
However, it is equally clear that the haulage industry will be in dire straits by the end of the year unless fuel prices slump dramatically or significant rate increases and or surcharges are introduced.
One haulage industry figure has estimated that a rate increase of 10 per cent across the board, plus a 5 per cent short-term fuel surcharge is required for hauliers to keep their head above water in the year ahead.

At double the rate of inflation, the prospect of getting a 10 per cent rate increase is remote to say the very least. Rate increases in the range of 3 to 4 per cent are achievable in the current economic climate, but with over capacity in the haulage market, despite many hauliers going to the wall, rate increases will be hard earned.

The likelihood of industry agreeing to a short-term fuel surcharge is also remote. No matter what way it is dressed up or disguised, a fuel surcharge, would add to industry's cost base at a time, when cost reduction rather than escalation is on the agenda.

The most the haulage industry can hope for this year from industry is a low single figure rate increase, which might just keep pace with inflation. Some hauliers will fare better than others. Those with contracts in the pharmaceutical sector will probably fare best.

For the past 12 months the Irish Road Haulage Association has been battling with Finance Minister Charlie McCreevy in relation to excise duty on diesel. The association was furious when Minister McCreevy added 3 cent per litre in excise duty in last December's Budget.

The association contended that the burden should have been spread across all motorists and that excise duty on petrol should have also been increased. The IRHA stressed diesel isn't a discretionary spend for hauliers and therefore the excise duty on diesel for commercial use should have a different (lower) rate.

The Essential User Rebate System (EUR), which would acknowledge this fact, was first mooted in the summer of 2000, when hauliers across Europe protested at spiralling fuel prices. The system would allow licensed operators to claw back some of the excise duty on diesel in the form of a rebate, by virtue of the fact that they are essential users. The system would not apply to private motorists who drive diesel cars, because they could switch to petrol cars.

That year the IRHA even offered to administer the scheme for the Government on behalf of its members. The EUR was put on the back burner, when in the December Budget of 2000, Finance Minister Charlie McCreevy reduced excise duty on diesel by six pence (7.62 cent) per litre.

In intervening budgets Minister McCreevy has clawed back all of the reduction and the Government now takes more than 30 cent per litre (ex Vat) on every litre of diesel sold in the country.
Minister McCreevy will take some convincing that there are merits in the EUR. In December 2000, he wasn't convinced, at a time when the coffers were full to overflowing. Instead he plumped for a straight reduction in excise duty. It will be even harder to convince him this time round, but nevertheless, it is a road well worth pursuing.

Early next year, hauliers and other road users will be hit with yet another tax - the carbon energy tax, which will have a negative impact on the haulage industry. It will be a tax too far for many operators, unless help is forthcoming now.