VARIABLE FUEL RATE
The current variable fuel rate % for domestic services
2020 May: 4.7%
2020 April: 4.2%
*refer VFR 2-month lag
As the cost of fuel is one of the most significant and fluctuating factors to the transport industry, the adoption of a Variable Fuel rate allows this cost to evolve whilst your base freight rates remain the same.
The Variable Fuel Rate (VFR) is a surcharge that has been introduced effective 1 July 2017 to cover the dynamic cost of fuel and can provide many advantages to your business;
Your VRF and freight rates are separate so rates will not need to be renegotiated every time fuel prices change;
VFR built into your freight rates can be higher to account for the inflation of fuel, keeping them separate means that you benefit from falling fuel prices;
When the price of fuel decreases, so will your VFR; &
The rates are transparent and displayed so you can at any point determine how the rates are calculated.
At the beginning of each month, the VFR will be calculated based on the average price of diesel.
> Calculating the Variable Fuel Rate
There are two key components to calculating the VFR;
This is the current price for our products/services that we offer.
Variable Fuel Rate
This is a percentage of your base rate, which is calculated by using that months VFR.
To calculate the total price you pay for a product or service, the base price is multiplied by the Variable Fuel Rate then added to the original base rate.
Base Price + (Base Price x VFR) = Total Price (excl GST)
For example: If the base rate is $5.00 and the current VFR is 2.00%, the total price would be $5.10 + GST
Two Month Lag
To calculate the VFR for the current month we use the Index from two months earlier. For example, to calculate the July VFR, we use the Index price from May.
Average Diesel Price
The Ministry of Business, Innovation & Employment (“Index”) publishes the Weekly Oil Price Monitoring tables. The VFR is calculated using the ‘Average diesel main port price less taxes, levies and ETS (Emissions Trading Scheme)’ This index is available here on the Ministry’s website.
When is the VFR applied?
As of 1 July 2017, our VFR uses a Baseline Diesel (Index) price of $1.05. The ‘trigger point’ for when the VFR is applied is when there is movement of $0.01c above the Index price of $1.05. If the average diesel price for the month including taxes is $1.05 or below, then no VFR will apply for that month.
The VFR for each month alters according to the average monthly diesel price