Fuel price causing concern

Reading Transport Ltd (RTL), Reading’s and Newbury’s principal bus operator is concerned that fuel costs have risen by 30% since last year. Prices in the London and New York markets have already reached $120 a barrel and there are predictions by OPEC, the oil producing cartel that prices are set to rise to $200 a barrel. These prices are very unlikely to fall back as OPEC is not planning to increase production until 2012.

This situation is now forcing up diesel costs causing many UK bus operators to implement emergency fares’ increases.  RTL has not yet raised its fares but pressure is growing and its managers are keeping the situation under review. 

RTL’s Chief Executive Officer James Freeman said ‘the pump price of fuel has risen spectacularly during the past six months and I fear that this is making some of our Reading and Newbury services uneconomic.  We will soon be faced with the dilemma of either a fares’ increase or withdrawal of certain low margin routes. ’

A major problem facing bus operators is that fares’ increases tend to cause a reduction in patronage because customers are very price sensitive.  Conversely, the very strong Reading and Newbury economies means that increased fuel prices do not seem to affect motorists demand for travel to the same extent.

The creation of Reading’s Premier Route network has led to growth in customer numbers of about 2% per year and RTL has set itself the target of further increases in its patronage every year for the next five years.  RTL’s Finance Director James Carney said ‘we have invested £13 million in new buses during the last three years.  The Company is continually working at reducing our costs and maximising patronage and whatever changes have to be made we are determined that the winning formula of frequent services and affordable fares are maintained.’