When fuel costs rise, everything else follows. COSBOA’s Skye Cappuccio says small businesses are resilient, but they cannot absorb sustained cost increases indefinitely.
What’s happening: Fuel prices across Australia have surged sharply in recent weeks, driven by escalating conflict in the Middle East and disruption near the Strait of Hormuz, a chokepoint for roughly one fifth of global oil supply.
Why this matters: The Council of Small Business Organisations Australia says the impact is already being felt, and for businesses already managing rising energy, insurance, wage and compliance costs, there is very little room left to absorb another hit.
For many Australian small businesses, the latest rise in fuel prices is not an inconvenience. It is a direct hit to the bottom line. The Council of Small Business Organisations Australia says the pressure is being felt across industries, with some sectors and regions carrying more of the load than others.
“Many small businesses are feeling the impact of rising fuel costs and uncertainty around supply,” COSBOA CEO Skye Cappuccio said. “It is hitting differently across industries and is often more pronounced in regional areas, but the effects are being felt right across supply chains.”
Australia imports more than 90% of its refined liquid fuels, and because oil is priced in US dollars, a falling Australian dollar compounds the effect of any global price rise. Diesel has climbed to around $2.60 per litre in some parts of the country, with regional areas seeing even higher prices at the bowser.
CPA Australia has also flagged the squeeze, with Business Investment Lead Gavan Ord saying businesses reliant on fuel are already seeing costs flow directly through their operations. “Fuel isn’t optional, it’s fundamental, and when prices spike, costs rise immediately with very little room to hide,” Ord said.
Regional businesses hit hardest
The pain is not evenly distributed. For businesses in regional and remote areas, fuel is both more expensive and more essential, with fewer alternatives and longer distances between suppliers, customers and service points.
Cappuccio said the impact is more pronounced in regional areas, where transport dependency is higher and the ability to absorb sudden cost increases is lower.
“For tradies, delivery operators, farmers and regional retailers, fuel is not discretionary. It is a daily cost of doing business,” she said. “When fuel prices rise, those costs flow directly into transport, logistics and service delivery, and, where they can, through to customers.”
A NSW Government fuel security round table convened in mid-March, attended by around 60 industry and stakeholder representatives, concluded that overall fuel supply remains adequate, with the main concern being a surge in demand driven by panic buying, which is particularly affecting regional businesses and essential services.
Costs flowing through the chain
The effects do not stop at the petrol station. Rising fuel costs feed through supply chains, lifting the price of freight, materials and services well beyond the businesses directly filling up vehicles or machinery.
“Fuel is one part of a bigger picture,” Cappuccio said. “Small businesses are already managing rising energy, insurance, wage and compliance costs. When these pressures combine, it reduces the ability of businesses to absorb shocks, delays investment and places further strain on viability.”
Road freight in Australia already operates on thin margins, with average operators recording net profit margins of around 3% in the last financial year, according to ANZ’s Road Freight Transport Industry Benchmarking report. The Australian Trucking Association has warned that sustained diesel prices above $2.10 per litre will force freight rate renegotiations across the industry, costs that will ultimately flow to the businesses relying on those services.
CPA Australia warned that many small businesses may soon have little choice but to pass costs on to customers as margins tighten further. But with consumer sentiment at record lows, how much of that is actually possible remains an open question.
What needs to happen now
Cappuccio said practical flexibility across the financial and contracting system will be critical while pressures remain elevated.
“We encourage banks and the ATO to take a practical and proportionate approach to recovery to help ensure small businesses can maintain cashflow,” she said. “There is also a role for those contracting with small businesses to take a considered approach, including allowing for renegotiation where input costs have shifted.”
Access to timely information is also a priority. “Small businesses need as much insight as possible into fuel supply and market conditions so they can plan and make informed decisions,” Cappuccio said.
Looking further ahead, COSBOA said targeted and time-limited support may be needed if volatility persists, alongside policy settings focused on reducing the cost of doing business, simplifying compliance and enabling investment in more efficient vehicles, equipment and technology.
“Small businesses are resilient, but they cannot absorb sustained cost increases indefinitely,” Cappuccio said. “A stable and supportive operating environment is essential to ensure small businesses remain viable and continue to support their communities.”
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