Carriers can use technology, strategy to combat volatile diesel prices
In mid-December, crude oil prices appeared to settle into the $80- to $90-a-barrel range with fuel inventory high and demand generally low. And while diesel fuel prices are at a two-year high, the market fundamentals suggest those prices could drop.
Don’t count on it. At any time, stock market speculation, weather, geopolitical events and other random happenings may cause prices to spike or even initiate the next fuel crisis.
While you cannot control the market, you can control your operating costs and margins by using fuel-buying strategies to protect margins and build competitive advantage.
Channeling volume
The core strategy for lowering fuel costs is to consolidate vendors and fueling locations to maximize volume discounts. Small and large fleets alike can leverage the collective purchasing power of fuel and fleet card providers to save a few cents off retail fuel prices. These discounts are applied at the point of purchase.
Fleet One’s fuel rebate network of more than 1,100 locations has no transaction fees, and the average rebate is 3 cents a gallon. Fleet One also can assist fleets in negotiating their own discounts with truckstops, says Dave Rewers, vice president of group sales.
Besides offering discount networks, fuel and fleet cards provide electronic controls and instant visibility to fuel transactions by location, dollars, gallons and other categories such as fuel type.
Comdata plans to enhance its fleet card with controls for more than 75 different types of fuel, including biodiesel and compressed gas, and other products such as diesel exhaust fluid, says Cory Sickles, vice president of over-the-road product development. Previously, the fleet card could process and report four types of fuel transactions: Diesel #1, Diesel #2, Reefer and “Other Fuel.”
Using data
Just as critical as having tight controls on fuel purchasing is how you use information to sharpen your present and future fuel-buying strategies.
Fleet One’s fuel management group helps customers design custom fuel networks by considering shipping lanes, current fuel prices, fuel tax implications, volume and other factors. After fleets give drivers their fuel network locations, Fleet One provides reports on network compliance and the resulting dollar loss of noncompliance.
By using Comdata’s Web-based business intelligence platform, reportQ, fleet managers have visibility into spend levels, purchasing trends and historical data. They can monitor fuel savings and use the information – such as gallons purchased by location – to reshape their fuel network to maximize volume discounts.
To help customers with daily route planning, Comdata soon will introduce a fuel price index report, the Low Cost Network, which will show fuel price trends based on a monthly average to help customers locate the lowest cost of fuel by region, state and interstate.
With all due respect, the section on fuel hedging is a bit misleading. The "strategy" described is actually just locking in a fixed price for physical gallons for a few months. While there is a time and place for such an initiative, hedging can include many more things such as buying or selling futures, swaps, options, etc. all of which are generally a better hedging strategies for carriers than entering into a contract to buy fixed price physical gallons.
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