Fuel costs have gone from around a "normal" of around US$60/bbl to $90/bbl. This 50% increase in costs will increase E25 cost base by 50% making it permanently unprofitable. E25 might as well close now before they lose more money.
Nah that's not right.
Yes this will increase fuel costs but fuel costs are only a small portion of the logistics cost and logistics costs are only a portion of the total cost base. (There are also refinery costs so a 50% increase in crude is not a 50% increase in pump prices but I'll ignore this in the workings below)
From the table below (which is unfortunately USA data) fuel costs at "normal" rates were about 24% of transport costs. Haulage costs of A$42/t have previously been quoted which is about US$0.89/dmtu. A 50% increase in this 24% element of the logistics cost is an overall 12% increase in haulage costs. A 12% increase on $0.89/dmtu of costs is another US$0.11/dmtu on the cost base. A cost increase of US$0.11/dmtu is annoying (and thanks for the warning), but it is definately not the next killer that makes E25 unprofitable.
Do the figures used above align to what E25 has said previously? The Dec 2020 PFS didn't provide a pure logistics cost. It did note $42/t haulage and $12/t port costs. This aligns with the May 2020 announcement listing logistics at A$54/dt and a September 2020 video noting US$1.14/dmtu for logistics. [(42/33.1)*0.70 + (12/33.1)*0.70 = 1.14].
But why use 24% as the fuel component as a starting point? Across 2012 to 2014 the cost of a crude was typically around or over US$100/bbl. This pushed fuel costs up to 34-39% of total costs. From memory these higher costs prompted a lot of additional supply including fracking in the US. This ultimately pushed prices down and the 2015-2017 averaged under US$50/bbl. This pulled fuel costs down. Averages around US$60/bbl in 2018 and 2019 took fuel back up to 24%. There was a period in 2020 when crude prices collapsed and that would be beind the fall to 19%. So overall, these fuel cost proportions pass the "does that seem sensible" test when compared to crude prices. I also put tipper - BAB Quad into the Australian saferates site below and it punched out fuel at 36% of costs (at current fuel rates and default settings). A starting point before the increase in fuel rates with fuel at 24% of costs seems ball-park.
Also if crude costs remain elevated, the fracking supply response is likely to cut-in again so a subsequent period of lower rates will lower averages. E25 is not a 2, 3 or 5 year operation. Including inferred resources its got a 70 year mine life even after expansion to 3.9mt/yr.
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