What’s Really Happening

Things are getting tougher in Australia with diesel prices consistently going up in construction heavy regions. For most plant, especially heavy earthmoving gear, fuel is the main thing that you need to keep running. The more you use these machines, the more fuel they go through.

The rates for hiring this stuff go up right away because fuel is either included in the hire cost (wet hire) or it gets passed on to the contractor through the costs they pay for things like diesel (dry hire). This makes fuel one of the first things to go up when prices change, because it’s not like labour or depreciation which are in a more steady state.

And How It Affects Hire Options

Wet hire rates are the first to go up. Because fuel is included in the hourly rate, any increase in the price of diesel goes straight into the cost. So if you’ve got a machine that uses a lot of fuel you’ll see the quoted price go up pretty quick.

Dry hire puts the extra cost back on the contractor. The base hire rate might not change for a bit but the total cost of the project will go up because the contractor has to buy and manage the fuel themselves. What looks like a cheaper option at first can actually end up being more expensive. For a full breakdown of how wet and dry hire differ in terms of cost structure and responsibility, see our article on dry hire vs wet hire.

Delivery and float costs also go up, but more than the base hire rate. This is because the trucks that move the machines around use a lot of fuel, especially if they’ve got to travel a long way. As a result, fees for getting the machine to and from the site, or moving it around the site, tend to go up faster than the base hire rate. This is a thing that gets overlooked when you’re planning a project.

Full post: How Fuel Prices Affect Equipment Hire Costs

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