We round up expert views on fuel, electricity, vehicle prices and residual values to see whether 2024 will be more or less expensive than 2023.
Fuel costs
At the start of 2023, the price of diesel was starting to fall from the highs of 2022, and stood at an average in the UK of 174p per litre while petrol, following roughly the same trajectory, was at 151p.
Prices carried on falling, apart from a bounce in October, and by the end of the year were at 152p and 144p respectively. So, can we expect to see continued falls into 2024, or will the volatility of the last two years continue?
To begin with, there is the evidence of what has happened in the past few years to factor in, which is to expect the unexpected, and plan for unplanned spikes in price due to global events. Wars are still going on in Ukraine and Gaza and Russia retains significant antagonism towards the west. Hopefully though, no pandemics are on the horizon.
Parking these global events aside, and assuming no others contribute to instability, there is a feeling that fuel prices may only rise slightly through the year.
One reason is that Saudi Arabia has cut production of oil, and other OPEC+ members have lowered output targets, which has the effect of tightening supply and usually that means higher oil, and therefore fuel, prices.
Indeed, the US Energy Information Administration says it thinks oil prices should rise next year, as global demand for oil in 2024 exceeds supply. How much, as ever, is the multi-billion dollar question…
Electricity prices
Electricity prices are increasingly of interest to business fleets, and while these have also fallen in 2023, inflation and higher gas prices caused by disrupted supplies across Europe due to the war in Ukraine, mean it is likely they may not fall in 2024 much below where they are now.
The Office for National Statistics reported that inflation was still at 4.6% in its latest figures (October), even though in the year to October 2023 electricity prices fell by 15.6%.
However, Ofgem, the energy market regulator, has increased its price cap on domestic customer bills by 5% from 1 January 2024, and analysts at Cornwall Insight predicted that UK wholesale power prices would rise from an average of £96.64 per megawatt-hour in 2023 to £129/MWh in 2024. It also cited higher gas prices caused by the war in Ukraine.
One thing to bear in mind is the increased competition in the charging sector. The number of low-cost specialist tariffs for home charging, and the number of public rapid charging hubs is likely to more than double in number in 2024. The consequence of this is more choice for EV drivers, and increased opportunity to access lower prices.
Vehicle prices
Prices of new cars and vans have risen markedly in the past few years. But 2024 may see a change in this, says Cox Automotive in its 2024 Insight Report. Its calculations suggest that 2024 will be a period of stabilisation in the automotive sector generally, followed by a notable rise in registrations in successive years.
Cox Automotive Insight Director, Philip Nothard said: “Recent years in the automotive sector have seen a period of unprecedented change and tumult that are being driven by economic forces, geopolitics and technological innovation. “We anticipate that the market will eventually be split between manufacturers who want profitability at the cost of volume and market share; and those who will return to a 'push' market at the cost of profit for volume and market dominance.”
One area that was likely to hit electric vehicle costs was the end of the post-Brexit agreement on tariffs for non-EU battery and parts. However, the European Commission and the UK have agreed to extend the current rules until 2027, avoiding major prices on many models.
Mike Hawes, SMMT Chief Executive, said “Deferring the rules of origin is a win for motorists, the economy and the environment. Maintaining tariff-free trade in EVs will ensure consumers retain the widest and most affordable choice of models, at a time when we need all drivers to make the switch.
“Governments have listened to the sector and acted to safeguard the competitiveness of the EU and UK automotive industries.”
Residual values
Used car market prices have suffered a rollercoaster over the past few years, and 2023 was no exception.
Healthy used prices underpin the fleet sector, with leasing rates and total cost of ownership (TCO) often determined by them. When prices drop, the cost of leases and TCO usually rises as a result.
However, 2024 should see some return to normality, industry analysts CAP HPI believe. It said that the glut of used cars hitting the markets this year has slowed, and this should continue into 2024. The result is used prices stabilising.
It explained: “We are now most of the way through a period where bulging order banks at the largest fleets are being fulfilled, resulting in a short-term glut of used volume. This is likely to ease as we enter 2024 and the further the year progresses, the more the market will feel the benefit of reduced new car registrations through the pandemic translating into lower levels of used car supply and subsequent improvements in used values.
“As we move into 2024, we will start to see the positive impact of reduced used car supply as a result of more than 2.45 million fewer cars registered through the course of the pandemic, particularly from fleets (approximately two thirds of the shortfall).”
Not all vehicle sectors are given such a positive report. CAP said the used market for electric vehicles is likely to remain “extremely complex” for some time.
In conclusion…
While inflation continues to hit the UK economy, it seems the cost of running a fleet is going to be affected by some pricing pressure. However, the outlook is far more positive than previous years and fleet costs in 2024 look more stable. And there are always ways to ensure a fleet is run as cost effectively as possible too. Buying fuel and electricity better is one.
With Allstar, you can access discounts on diesel, search for the lowest prices for petrol, pay for home charging more efficiently and choose from thousands of public charge points.
Speak to us about how we can help you run your business vehicles more cost effectively.
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