UAE fuel prices rise: Will rising costs make deliveries more expensive?

Dubai shoppers face the prospect of higher delivery fees as fuel costs soar in the UAE. Diesel prices recently hit Dh4.80 per litre, marking the highest level in years and a 11.6% jump from September's Dh4.30. This surge impacts businesses reliant on vehicle fleets, including those delivering parcels to customers' doorsteps.

The Fuel Price Committee reviews rates monthly to align with global prices. The recent hike follows a 60% rise in retail fuel costs since the regional crisis began in February. The 60-day US-Iran ceasefire has ended, and increased Houthi attacks on Red Sea oil infrastructure have exacerbated the situation.

Last-mile delivery, which involves transporting small individual consignments, is particularly vulnerable to rising fuel costs. Sam Achampong, Regional Director of CIPS for the Middle East, Africa, and Asia-Pacific, warns that sustained high fuel prices could force businesses to implement measures like higher minimum-order values for free delivery, fewer express-shipping options, or adjustments to delivery fees.

However, Achampong suggests businesses will initially focus on efficiency, such as route optimisation, shipment consolidation, and reducing unsuccessful or repeat deliveries. Freight costs extend beyond diesel, encompassing drivers, vehicles, warehousing, technology, and administration.

Tobias Maier, CEO of DHL Global Forwarding Middle East and Africa, notes that diesel prices are just one component of a broader cost equation. The company has responded by managing capacity, using flexible routing, and coordinating closely with customers. Maier emphasizes the difficulty in isolating the effect of diesel prices alone, as supply chains have adapted to longer transport routes and additional handling requirements.

For some businesses, the pressure is already affecting profitability. Lauren Hamilton, founder of Ride Skipper, a chauffeur-driver-provider app in the UAE, says their costs have increased by 40%+ over the past few months due to rising fuel costs. They are working with a partner to improve fuel performance and reduce wastage, but switching to more fuel-efficient vehicles is not yet an option.

The immediate challenge is balancing operating costs while maintaining existing prices. The impact of rising fuel costs on consumers' free delivery may not be immediate, as e-commerce sellers are unlikely to increase delivery charges while free or low-cost shipping has become a customer proposition.