Inflation rises amid Iran conflict costs

The ongoing conflict between the US and Iran continues to impact food supply chains, with industry experts warning that inflation is not slowing down. Fuel and logistics costs due to the blockade of the Strait of Hormuz are driving up the headline inflation rate, which rose from 2.9% in July to 3.1% in August.

Food price inflation remained steady at 1.3%, but the IGD charity forecasts that it could rise to above 6% by next year, saying that “food inflation has been delayed, not avoided”.

Brent crude oil futures have surged past $100 a barrel, the highest level since May, causing concern among supply chain experts. Diesel prices have increased by as much as 40% compared to pre-war levels, resulting in an 8% hike in freight costs, according to Jack Baxter, operations director at logistics firm Europa Road.

Baxter noted that Europa Road has been forced to pass these costs on to customers, and ultimately consumers, through higher prices. RAC data shows that average UK diesel prices have risen from around 142p per litre before the start of the Iran conflict to over 190p per litre today, adding roughly 35% to fuel costs.

Impact on the Fishing Industry

Mike Cohen, CEO of the National Federation of Fishermen’s Organisations, said that the fuel price situation is “extremely challenging” for fishers, with “everybody suffering”. Red diesel prices have caused fishing trip expenses to soar, with trip costs now accounting for about 40% of the value of the catch.

Cohen added that some fishermen have been forced to stop work due to the high fuel costs, with one producer organisation in the south west reporting that five out of six scallop vessels have had to cease operations. The situation is also starting to affect processors, who are having to look further afield for supplies due to the disruption to the supply chain.

Cohen urged the government to provide support to the fishing sector, citing the relative support received by the industry in the EU. He noted that the EU has a crisis fund for situations like this and that various member states have been providing financial support to their fishing fleets.

Call for Government Action

The Petrol Retailers Association warned that ongoing global fuel supply pressures, compounded by Yemen-based Houthi rebels affecting Saudi Arabia’s alternative export route via the Red Sea, meant it was becoming “impossible for forecourt operators to absorb these levels of wholesale price increases without putting their businesses at risk”.

The association is urging the Chancellor to abandon the planned fuel duty increase and avoid adding further pressure at the pump. With prices continuing to rise, retailers are facing significant challenges in absorbing the increased wholesale fuel costs.