Diesel fuel prices have been declining for an extended period of time and have reached some of the lowest levels we’ve seen over the past couple of years. Supply has been strong and demand has been modest so it looks like prices will remain lower for a while, at least until we see what the upcoming winter has in store for us.
Fleets are benefiting from the lower fuel prices as their bottom lines are positively impacted. Refiners and suppliers are also enjoying wider margins as the price of crude oil declines. As a result, it’s likely that some fleet managers are no longer focused on reducing their fuel spend since prices seem relatively low. That’s unfortunate because times like these are when fleets may face a greater risk of overpaying for fuel based on the concept of the “Sticky Down.”
Sticky Down refers to the scenario when wholesale fuel prices are declining but suppliers are slow to reduce their retail prices. This pricing strategy provides them with an opportunity to grab a few extra pennies of profit along the way. If you’re not tracking the wholesale market, you may not even realize your prices were inflated. This is because your prices still appear to be declining compared to your historical reference point.
It’s always important to closely analyze fleet fueling transactions to detect billing errors or potential theft regardless of price changes. In addition, the same process should continually be used to audit the invoiced price of fuel to be sure it can be reconciled with negotiated deals and validated by industry benchmarks like OPIS.
If you don’t have the time or the tools to follow-through on the details, you could easily wind up overpaying for fuel. Otherwise, you should consider hiring an expert like Sokolis Group Fuel Management to review all of your fueling transactions to make sure your company does not get “stuck.“