Rising Fuel Costs: Threat to Margins

The recent escalation in global fuel prices is beginning to have a tangible impact.

For many contractors, particularly those operating in plant-intensive scopes such as earthworks, diesel fuel is a core input. As costs increase, the effect is immediate and material.

At Oakwood Consulting, we are seeing a consistent theme emerge across our contractor clients:

Margins are being eroded in real time, with limited contractual mechanisms available to recover the sudden and substantial increase in fuel costs.

Why This Is a Problem

Most contracts, particularly lump-sum or fixed-rate contracts, do not contain any rise and fall mechanism for fuel costs. While the outbreak of a war or conflict may fall within Force Majeure provisions, these provisions only deal with time and not cost.

Common issues we are seeing include:

The result is that contractors are absorbing the volatility into their bottom line.

Can These Costs Be Recovered?

The short answer is: it depends heavily on the contract.

Potential avenues may include:

Considerations for Now

How Oakwood Can Help

At Oakwood Consulting, we support clients in navigating these challenges through our Commercial Risk Management services. We are able to assist by:

Final Thought

Elevated fuel prices look likely to remain for months, not weeks.

The key to navigating the coming weeks and months lies in strategy, communication, documentation, and timing.