The current variable fuel factor % for domestic services is:
- Click here to view previous month’s data
Fuel costs are understandably one of the most significant and variable cost components in the transport industry.
The Variable Fuel Factor (VFF) was introduced for the purpose of providing for the increased costs in fuel, primarily diesel, to fairly compensate our couriers and line haul operators and to ensure a high level of transparency in our pricing model for our customers.
The VFF will be calculated at the beginning of each month and will be based on the average diesel price (adjusted for regional fuel taxes) from two months earlier1. By using this mechanism, we can:
- Provide transparency for customers to see how it is calculated
- Take into account any shifts in the price of fuel that impact significantly on the price of moving courier items
- Pass on any reductions, should the price of fuel decrease
- Give New Zealand Couriers customers advanced notice of what the VFF will be a month in advance
On 27th August 2018, the retail price as published by the Ministry of Business, Innovation and Employment was adjusted by $0.32 to account for the Auckland regional tax (Auckland Council implemented a $0.10/litre (excl GST) regional fuel tax on 1st July 2018)
How does the VFF impact on my business/courier pricing?
There is a trigger point of $0.95 cents (diesel retail price including GST) at which VFF for domestic courier services is applied.
Every 1c movement above $0.95 in the average retail pump price over a calendar month, results in a 0.1% increase in our service and product pricing. This is updated monthly and will be automatically adjusted on your invoice.
International Courier Services will be subject to a separate Variable Fuel Factor2.
The rates for our Variable Fuel Factors will be recalculated on a monthly basis for the coming month so you are able to take this into account.
1Average diesel retail price (adjusted for regional fuel taxes) as published by the Ministry of Business, Innovation and Employment which they refer to as the “main port price”. We will calculate the VFF for any given month using the average diesel retail price (adjusted for regional fuel taxes) from two months earlier.
2The costs of our international services are strongly impacted by the cost of jet kerosene, and as a result require a separate International VFF.
The total price you pay for a courier product / service will comprise of three components – the base price of products / services, the Variable Fuel Factor and the RUC surcharge. This is calculated by multiplying the base price of the products/services by (the Variable Fuel Factor + RUC surcharge), then adding this figure to the original base price to get the total price.
|If a ticket costs $10.00 and the VFF for the month is 2.70% / RUC surcharge is 2.00%, then:|
|Base price||+||base price x ( VFF + RUC )||=||Total Price||+||GST|
|$10.00||+||$10.00 x ( 2.70% VFF + 2.00%RUC )||=||$10.47||+||GST|
|VFF and RUC surcharge||=||$0.47||+||GST|
The Variable Fuel Factor was introduced for the purpose of providing for the volatility in fuel prices to fairly compensate our couriers and line haul operators – whilst also ensuring our customers benefit from any drop in the price of fuel. For more information on RUC surcharge click here.
The “trigger point” is the retail cost of diesel fuel at which the VFF will start to be charged on your courier products/services.
Domestic Courier Rates – The trigger point is $0.95 (this is based on average diesel retail pump price inclusive of GST over a calendar month).
We calculate the VFF percentage for any given month using the average diesel retail prices (main port price) from two months earlier. For every 1c movement in the average main port price, our rates will move by +/- 0.1% (click here to see the “Variable Fuel Factor Increase Table”)
International Courier Rates – The costs of our international services are strongly impacted by the cost of jet kerosene and the Variable Fuel Factor will be dictated by our international partners (with jet kerosene being a key factor). This figure is adjusted monthly. Please click here for specific information on our international VFF.
Our website will be updated each month with the VFF surcharge percentage for the next month. You can find the current rate here at the top of the Variable Fuel Factor page.
We will include the VFF in the price of the charges listed on your invoice/statement. This allows you complete visibility as to the total price of each item.
We will review the average price of fuel each month. If the average diesel retail pump price fluctuates, our VFF will rise and fall in line with fuel prices. The VFF mechanism can be reviewed if New Zealand Couriers believes that business conditions require this.
We will implement a two month lag to try and provide a buffer in regard to the latest increases, and each month we will post the VFF surcharge percentage for the next month on our website. The rate for each subsequent month will be based on the average price two months prior.
Should the retail price of diesel (incl GST) drop below our VFF trigger point of $0.95 per litre, the VFF will revert to 0% (after the two month buffer).
To view the “Weekly oil price monitoring” information as published by the Ministry of Business, Innovation and Employment go to the Ministry’s website here, this shows the average diesel retail pump price in New Zealand which is referred to as “main port price”. At the time of first looking to implement the VFF (July 2008), diesel prices had risen by 85% over the previous year.
In terms of fuel, the greatest impact on our domestic courier network (i.e. within New Zealand) comes from movement in diesel prices; the greatest impact on our international courier network (ie exports/imports to/from New Zealand) comes from movement in jet kerosene prices.
Movements in diesel and jet kerosene prices are not always directly aligned – the purpose of the VFF is purely to pass on incremental costs, not increase margin, by creating two separate VFFs we can offer our customers increased transparency.
The New Zealand Emissions Trading Scheme (ETS) is part of the Government’s primary response to global climate change. Effective 1st July 2010 an additional tax has been applied to fuel, and passed on through the pump price.
For more information on the ETS visit www.mfe.govt.nz/ets.
Historic Diesel Price Graph
Data courtesy of the Ministry of Business, Innovation and Employment
Variable Fuel Factor Increase Table
|Diesel Price (incl GST)||VFF increase|
- Click here to show more data