Fuel is fast becoming the biggest cost pressure in small businesses. According to MYOB’s latest Business Monitor, more than half of small businesses (51 per cent) now say fuel is their number one source of stress.

You can negotiate rent and cut your marketing spend, but fuel prices are out of your control. So, is it any wonder that fuel stress has doubled in recent months? According to MYOB, fuel stress is overtaking utilities, interest rates, and cash flow as the number one stressor for business owners.

“Australian SMEs are facing rising fuel costs and mounting supply uncertainty, and it’s hitting their margins and their confidence,” says MYOB CEO Paul Robson.

Fuel prices impact everything

While households are bellyaching at the cost of fuel, small business owners are even more worried. Fuel costs affect multiple expense lines for most business owners. Everything from delivery costs to supplier pricing can be affected. Tradies, retailers and hospitality businesses are doing it particularly tough.

The Australian Retail Council has been pretty blunt about it. CEO  Chris Rodwell says:

“More than half of retailers are experiencing increases in freight and shipping costs of more than 10 per cent.”

Meanwhile, consumers have adopted a cautious approach to spending. “Retailers are being hit hard by the sharp increase in costs at the same time as consumer confidence is at a record low,” Rodwell adds.

The government’s quick fix

Yesterday’s national cabinet meeting saw the government step in with a temporary fuel excise cut. On paper, it knocks about 26 cents per litre off the price. But is this enough to help business owners teetering on the edge of hardship?

Rodwell says, maybe, maybe not.

“The cut will make a meaningful difference in the short term, particularly for small retailers … [but] there is a clear need to improve supply chain resilience … and reduce the overall cost of doing business.”

The global mess landing on your P&L

A big chunk of this pain is coming from overseas. Supply disruptions, geopolitical tensions, oil shortages, all the stuff that feels far away until it shows up in your ledger. According to MYOB, one in three small businesses (33 per cent) identified geopolitical issues as a key risk to their business, up from 14 per cent late last year.

Even before the war in Iran, prices were creeping up.

Finder’s Taylor Blackburn explains: “Australian petrol prices have continued to surge… creating a supply crunch with no end in sight …

“For many Australians, fuel has shifted from a routine expense to a major source of financial dread,” Blackburn adds.

Jobs on the line

This financial dread is trickling through to businesses, and it’s directly impacting hiring decisions and business growth. Many businesses have already gone into survival mode.

ARC data shows 58 per cent of retail businesses say current conditions are leading to staff reductions. Some are already making cuts. If the war drags on, one in three say it could threaten the viability of their business. So, where to next?

Most small business owners are already looking for ways to pivot and adapt. The MYOB data shows 27 per cent are planning to increase prices. Another 18 per cent are doubling down on customer acquisition.

The EV equation

If there is anything positive to take away from the current crisis, it’s that it’s accelerating the adoption of alternative energy sources. Dr Terrance Mak says the fuel crisis is also pushing EV adoption to the forefront.

“The fuel crisis is a wake-up call for the country to move to more electrification and better contingency management on fuel supply,” Mak says.

Monash’s Professor Yolande Strengers agrees. “We’re seeing a significant increase in interest and sales for EVs in the current fuel crisis.”

Yet Strenger warns that not every small business or Aussie household can afford to make the shift.

“Vulnerable households like low-income households, renters and people living in apartments are also less able to shelter from the impact,” she confirms.

Meanwhile, the ARC’s chief exec said broader action is needed to address structural cost pressures if businesses are to survive.

“ We also need to deepen efforts to reduce the overall cost of doing business. That includes tackling regulatory complexity, easing compliance burdens and improving productivity across the economy,” Rodwell said.

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