In the week to 5 October, the average UK pump price of diesel reached 199.5p a litre. That beat the previous record of 199.2p, set in July 2022, and left diesel about 60p a litre above where it started the year.
Most leadership teams have already seen the fuel line move. Fewer can say how much of the increase has reached their customers' invoices, how long it took to get there, or how much is still sitting in their own margin. Those are the numbers that decide whether a cost shock costs you a quarter or a year.
This article sets out a practical way to find them. We call it the pass-through review. It is written for businesses that move goods, run vans or lorries, buy freight or depend on suppliers who do. That covers most of manufacturing, distribution, wholesale, construction, food and field services.
The cost you can see is the smaller problem
Fuel reaches a business in four places. Only one of them shows up clearly in the management accounts.
1. Your own fleet and plant
Diesel for your vehicles, generators and site machinery. It's the easiest number to find, and the one most boards already have.
2. Carrier surcharges
If you use hauliers, couriers or freight forwarders, fuel arrives as a surcharge on top of the base rate. These move quickly. One UK haulier's published surcharge went from 12% in July to 19% for the week starting 21 September. DP World's weekly emergency fuel escalator for UK road and intermodal freight rose from 4.72% to 14.86% over a similar period, according to figures reported by The Loadstar.
Hauliers have little choice. The Road Haulage Association has said many of its members run on margins of about 2%, so almost all of the increase will be passed on. Surcharges are often coded to a separate line or paid within supplier invoices, where the commercial team never sees them.
3. Supplier prices with freight inside them
Plenty of suppliers sell on a delivered price. When they raise it, the letter mentions energy, wages and fuel in one sentence. You can't tell how much is freight, how much is something else, and how much is the supplier taking the opportunity.
4. Service promises that burn fuel
Free delivery thresholds. Next-day commitments. Small drops, tight delivery windows, re-deliveries, emergency call-outs. Each of these now costs more to fulfil, but the promise sits in a price list or a customer agreement that nobody has reopened since the spring.
The second, third and fourth categories are harder to measure than the first. They are also the ones least likely to have a named owner. Our Operations & Efficiency work starts with exactly this kind of cost-to-serve mapping.
What the leak looks like in numbers
Here is a hypothetical example. It is not a client, and the figures are rounded.
A distributor turns over £30m at an 8% operating margin, so it makes £2.4m of operating profit. It runs 18 articulated lorries, each using about 38,000 litres of diesel a year (roughly 70,000 miles at 8.5 miles per gallon). It also spends £1.2m a year in base rates on third-party inbound freight.
Pump prices include VAT, which a VAT-registered business recovers. Strip it out and the rise from about 140p to 199.5p is close to 50p a litre. Bulk and fuel-card prices will differ, so treat this as an order of magnitude.
That is about 19% of operating profit, before counting any fuel inside supplier prices or the extra cost of service promises.
Suppose the business has recovered 55% of it through existing surcharge clauses and two customer price rises. Around £208,000 a year is still sitting with the business. And if its largest customer's contract only allows a price review each January, the cost on that account has been carried since March.
Two numbers the board should ask for
The first is the pass-through ratio: the cost increase recovered through price, divided by the cost increase incurred, over the same period.
The second is the recovery lag: the number of days between the cost increase landing and the customer price moving.
The ratio tells you how much you get back. The lag tells you how long you fund the gap yourself. Leadership teams tend to focus on the first, but the second can matter more. Take two businesses facing the same monthly cost increase over a year. One recovers 90% of it, six months late. The other recovers 70%, within two weeks. The first carries the equivalent of about six and a half months of the increase. The second carries about four. Over a year, the faster business keeps more cash.
Calculate both by customer or contract, never only as a company average. The average hides the accounts that matter.
Build the pass-through map
The map is a single table. Give each of your top 20 customers or contracts its own row, and put everyone else in one final row.
Download the Pass-Through Review Pack, with the map, ratio calculator and route selector.
Finance can fill the revenue column in an hour. The intensity column is harder, and rough is fine at this stage. You need a ranking of accounts, and estimates will give you one.
The column that usually changes the conversation is "next point price can move". It shows which accounts are locked, until when, and how much the business will carry before then.
Choose a route for each line
There are five routes. Every row on the map gets one, and someone should choose it deliberately. Work through them in this order for each row of the map.
Index
Link price movements to a published index, such as the government's weekly road fuel price statistics, with an agreed baseline, an agreed fuel share of the price and a fixed review frequency. This suits longer contracts where fuel is a material part of the cost to serve. Customers accept it more readily because it moves in both directions.
The trap is setting the fuel share too low or reviewing quarterly when costs are moving weekly. Both quietly turn an index clause back into absorption.
Surcharge
A separate, visible line on the invoice, set from a published table. It suits shorter relationships and price-list customers, and it is usually easier to introduce than a change to the base price.
The trap is a table that only steps up. If the surcharge doesn't come down when diesel does, customers will remember it at renewal.
Reprice
Change the base price, at renewal or under an existing review clause. This is the right route where the increase looks persistent. There are reasons to think it may be: fuel duty is due to rise by 3p a litre in January and 2p in March, and the House of Commons Library points to tight refining capacity behind diesel's unusually wide premium over petrol. Nobody knows where the oil price goes next, though, and that includes us.
The trap is waiting for the review date while the cost accumulates, or folding fuel into a general increase the customer has no way to check.
Redesign
Change the service instead of the price. Raise minimum drop sizes, consolidate delivery days, charge for expedited orders, widen delivery windows or move non-urgent freight to slower, cheaper modes. This suits accounts where price is hard to move but the service model has slack. It is often the most profitable route, because it cuts miles as well as recovering cost.
The trap is announcing it as a company-wide cost saving. Agree it account by account.
Absorb on purpose
Hold the price for an account where the relationship is worth more than the cost, or where a competitor would use the moment to take the business. That can be the right call. It needs a written decision with the annual cost, a named approver and an end date.
The trap is absorbing by default and calling it strategy afterwards.
A practical note on contracts: price variation clauses, notice periods and fixed-price commitments vary widely. Check what your terms allow, and take legal advice before issuing changes to any contract that is unclear.
Check what you are paying before you ask customers to pay more
Your own costs deserve the same scrutiny you are about to ask customers to accept. Bain's recent article on US diesel makes the point that a large part of the risk lies in how slowly surcharges fall once prices drop. The UK has form here. In 2023 the Competition and Markets Authority found "clear evidence in the data of rocket and feather pricing for diesel" at the pump, meaning prices that rose quickly and fell slowly. Fuel tables in freight contracts can behave the same way.
Put four questions to every carrier and freight-heavy supplier.
- Which published index does your surcharge follow, and what baseline price does it assume?
- How often does the table change, and does it come down on the same schedule as it goes up?
- What share of your delivered price is freight?
- If we change order frequency or drop size, what happens to your price?
The third question is the one that separates real cost pressure from a convenient letter. A supplier who can't answer it is asking you to take their word for it.
The fourth often produces the best result. Fewer, larger orders can cut a supplier's cost by more than the surcharge, and some will share that saving if asked.
Talking to customers
Start with how the mechanism works, then give the number. Account managers should be able to explain the index used, the fuel share assumed, the review frequency, the date of the change and what happens when fuel prices fall. A business that offers to pass on reductions has a much easier conversation about increases.
Where you can, offer a redesign option alongside the price route. Fewer, larger deliveries at the old price is a reasonable offer for many accounts, and some customers will prefer it.
Speak to your largest accounts before anything arrives in writing. A letter is the right way to confirm a change. It is the wrong way to announce one to a customer worth a tenth of your revenue.
A 90-minute agenda for the leadership team
The first review doesn't need a project. It needs one meeting with the right numbers in the room.
Finance should circulate the map 48 hours beforehand, even if half the intensity column is an estimate.
Three mistakes to avoid
Treating the fuel card as the whole bill
In the example above, a quarter of the increase came through inbound freight. That is before counting the fuel inside supplier prices.
Sending every customer the same letter
One letter to the whole book recovers too little from the accounts with the highest cost to serve. It also creates friction with the customers where fuel barely registers.
Building a mechanism that only goes up
It may win this year's argument. It will cost you at the next renewal, and the next fall in the oil price will make it obvious.
Where outside help is worth having
Most businesses can complete a first pass-through map themselves. Help is worth considering when the cost-to-serve data doesn't exist, when the gap is large enough to threaten covenants or cash headroom, or when the big accounts need a commercial conversation that the account team is too close to.
If the gap is part of a wider squeeze, read Solvent but Stuck.
Allington Advisors' Operations & Efficiency team runs focused pass-through reviews: cost to serve by account, contract mechanisms, supplier challenge and a customer conversation plan. If you can't yet say how much of this year's fuel and freight increase you have recovered, we would be glad to talk it through.