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Dubai: Picture this, your shopping cart is full, and you’re ready to check out. But before hitting pay, a thought crosses your mind: will delivery still be free next month? The culprit behind that thought sits at the petrol station and is triggered every month end when you see the new fuel rates.
Diesel now costs Dh4.80 a litre in the UAE, its highest level in years. Prices are up from Dh4.30 in September, which is an increase of 11.6%. For businesses operating vehicle fleets, the increase adds to expenses across transportation, freight and last-mile delivery. This includes the many vans that bring a parcel to your doorstep.
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The immediate response has been to protect customers from higher charges while improving operational efficiency. But industry executives warn that sustained fuel prices could change that calculation.
The Fuel Price Committee revises rates monthly to track global prices. Retail fuel costs have climbed more than 60 per cent since the regional crisis began on February 28. The 60-day US-Iran ceasefire has expired, and Houthi attacks on Red Sea oil infrastructure have stepped up. All that pressure lands hardest on the final leg of your order.
For e-commerce sellers, the consequences may emerge through higher minimum-order values for free delivery, fewer express-shipping options or adjustments to delivery fees rather than immediate increases in product prices.
Last-mile delivery faces mounting pressure
Last-mile delivery is particularly exposed because it involves transporting relatively small consignments individually rather than moving goods in bulk.
Sam Achampong, Regional Director of CIPS for the Middle East, Africa and Asia-Pacific, said that increasing diesel costs would put pressure on one of logistics operators’ key variable costs. “The bigger issue is how long these fuel prices persist. Businesses can absorb short-term volatility; sustained higher costs eventually have to be dealt with somewhere in the value chain,” he said.
However, an 11% increase in diesel does not translate into an equivalent increase in delivery costs. For companies delivering hundreds of parcels across a concentrated area, the ability to complete more deliveries per journey can help offset higher fuel expenses.
Achampong said businesses were likely to focus on route optimisation, shipment consolidation and reducing unsuccessful or repeat deliveries. “The first response should be efficiency rather than simply passing the cost on to customers,” he said.
Freight costs extend beyond diesel
Fuel is just one component of a broader cost base that includes drivers, vehicles, warehousing, technology and administration. The impact also depends on fleet size, delivery density and contractual arrangements.
Tobias Maier, CEO of DHL Global Forwarding Middle East and Africa makes the same point from the freight side. “Diesel prices are certainly an important factor for the logistics industry, but they are only one component within a much broader cost equation,” he observes.
Complexity bites harder in his view. “The greater challenge often comes from increased operational complexity”. Supply chains have adapted to “longer transport routes, alternative gateways, additional handling requirements, waiting times and changing capacity availability,” in reaction to the on-ground situation. That is why, he clarifies, “it is difficult to isolate the effect of diesel prices alone.”
DHL has responded through capacity management, flexible routing and closer coordination with customers. Maier said the company secured additional transport capacity early in the current crisis to maintain service continuity despite disruptions. Its asset-light operating model also allows it to work with established carriers and transport partners, alongside its own transport assets where required.
The company also maintains discussions with customers about cost developments. “We maintain an open dialogue with our customers about cost developments and the factors driving them. Certain cost elements, such as jet fuel-or bunker-related surcharges, are linked to recognized market indices and move in both directions,” he added.
Fleet operators struggle to absorb increases
For some businesses, the pressure is already affecting profitability.
Lauren Hamilton, founder of Ride Skipper, said the company initially decided not to reflect rising fuel costs in its pricing when the regional conflict began. That commitment is becoming harder to maintain. “We’ve seen 40%+ increase over the past few months,” she said.
Ride Skipper, is a chauffeur-driver-provider app that operates in the UAE. They use Nissan Kicks’ cars to transport drivers between home, client pick-ups and drop-offs, and shift locations. Each vehicle covers upwards of 12,000 kilometres a month.
“When we have seven shuttle cars doing upwards of 12,000 KM per car per month, even a percentage point increase makes a difference to our profitability,” Hamilton said. The company is working with a partner to improve fuel performance and reduce wastage.
Switching to more fuel-efficient vehicles remains an option, although Hamilton said it was too early to confirm whether that would happen. The immediate challenge is balancing operating costs against the need to maintain existing prices.
Will shoppers lose free delivery?
For consumers, the first signs of rising logistics costs may not necessarily appear as higher product prices. Achampong said e-commerce sellers would initially be reluctant to increase delivery charges because free or low-cost shipping had become part of their customer proposition.
Instead, businesses could introduce higher minimum-order values for free delivery, encourage customers to consolidate purchases or reduce the availability of free same-day and express services.
“I don’t think consumers will necessarily see immediate across-the-board increase in prices or delivery charges”. But if diesel remains elevated for several months, businesses may have to reconsider their pricing structures. “Ultimately somebody has to absorb the additional cost – the logistics provider, the seller or the consumer,” Achampong said.
Efficiency becomes the immediate priority
For now, businesses are looking at ways to reduce fuel consumption, improve vehicle utilisation and protect margins without immediately changing customer prices. Ride Skipper is focusing on fuel performance across its existing fleet, while DHL is assessing alternative routes, transport modes and capacity.
The longer-term impact will depend on how long diesel prices remain elevated and how much operational efficiency businesses can achieve. A temporary increase may be absorbed through existing margins. A sustained rise could alter delivery charges, shipping thresholds and freight contracts.
The cost may not appear on every customer’s bill immediately. But if fuel remains at current levels, the pressure is likely to travel further along the supply chain.
