How high will diesel fuel prices and gas prices get and what your company could do.

If this feels like 2008 when crude oil blasted to $148 a barrel, diesel fuel prices were over $4.85 and gas prices were close to $4.25, it’s not.  It’s worse according to several fuel experts. Why you ask yourself as you see your company’s profits being pumped away on your fuel card.  It’s a little like the weather, why is it 65 degrees and sunny one day and 18 degrees the next day.  Many things happen to make those changes.

Let’s start with continued tension with Iran with the Strait of Hormuz, nuclear war, Syria and its ongoing tension.  President Obama is saying “I don’t bluff” as he warns Iran about nuclear weapons.  If you recall when your fuel savings were sucked up in 2008 there was the “war premium” built into the price per barrel then over other tensions in the World.  Within the same article I read on Thursday in the New York Times a set of fuel experts said this market could go over $150 a barrel, which would make gas prices over $4.25 and diesel fuel prices over $5.00.  In the same article other fuel analysts suggest that if the tension eases in the Middle East, crude oil could fall to $80 a barrel.  But I say, could it really?

Let’s take a look at another topic that helped drive fleet fuel prices up in 2008.  It was called a small country of China building for the Olympics.  The U.S. hadn’t fallen totally in the tank, though $148 for crude put us there.  Here is the point, when our economy goes so does the world economy.  U.S. economy is getting better.  Maybe not as fast as all of us would like but it’s moving in the right direct.  China that little country with 1.5 billion people, their demand is rising again.  They have been trying to hold inflation in place but people have needs and when you have almost 300 million people a year coming out of poverty level from your country, demand for fuel, food and other things going up.  Remember 300 million people is the U.S. population.

Here is another fact making life difficult for fuel management: 3 refineries on the East Coast all within 45 minutes of each other have closed or are ready to close.  The main refinery Sunoco Marcus Hook is due to close in July right at the height of gas season.  It supplies 50% of the Northeast gas supply, ouch.  The Department of Energy predicts that ULSD will be the most challenging product because of few alternative supply sources outside of the U.S. Gulf Coast.  What will give?  I think uncertainly is here to stay for a while like maybe forever in fuel.

As a fuel expert, I have to give you my view or it looks like I don’t have real solid view.  I am not a fortune teller; if I was I would have made my fortune already and playing golf daily.  My fuel expertise is in fuel management, fleet fuel planning, fuel auditing, improved MPG through idle reduction, but hey I have a view on this.

Based off the DOE National Diesel Fuel Price average of $4.02, I see the price going up 15-20 cents per gallon over the next 6 months.  I believe prices will climb another 15-20 cents per gallon from that point forward.  You want my view for another 6 months, another 10-15 cent increase.  This all could accelerate if these storms clouds keep coming in from Iran and closing refineries.

We talk to many companies about diesel fuel prices and how to control their fuel spend to help achieve better bottom line fuel savings. Have you looked at your idle time lately? When diesel fuel prices get over $4.00 a gallon, we find most companies do the following:

•            Look at their fueling program
•            Reduce speeds on their trucks for fuel savings
•            Look at fueling optimizers
•            Check how aero dynamic their trucks are
•            Check tire pressure on all tires
•            Check Idle time on their diesel fleet vehicles
•            Look at fuel hedging

All are good ideas, except for some of them, the cat is already out of the bag. Your too late and now climbing up hill. Clearly, all of the areas above are a good start, but what will help keep fuel costs in check right away is idle time reduction.  Over the last few years, companies have gotten a little lazy. It’s okay, you’re not the only company out there that this has happened to.  Diesel fuel prices have been lower than they are now. And with layoffs and staff cutting during this type of economy, who did you have looking at this or who do you have?

Quick side story.  A major trucking company hires a CFO a few years ago to help run the place for a couple of years in a turnaround function. The CFO gets things going, hires the right staff and a fuel manager. The CFO leaves because the turnaround is complete the fuel manager and his 1 person staff is saving the company solid 7 figures a year in costs. Times get difficult in 2009 and they take the fleet fuel manager and tell him his job is now driver recruiting and fuel management. Within 3 months, instead of fuel savings over $300,000 a quarter it was less than $100,000 because there was no longer a fuel czar. After 1 year the company realizes its mistakes and has the fuel manager return to only looking at diesel fuel costs and fuel savings return.

Idle time

Let’s look at it this way.  We all have good drivers, bad drivers, drivers that like to be warm and drivers that like to be cold.

Your diesel fuel truck burns approximately 1 gallon per hour idling.

The cost of diesel fuel is over $4.00

How many hours a day, week, month or year is each one of your trucks idling more than it should be?

Let’s pick a number and say on a 10 hour route, it idles for more than 1.5 hours than it should be. Fleet driver leaves the truck idle when he goes into the truck stop to grab a coffee. Leaves it idling in the yard at your clients location, etc.

Math project

• 1.5 hours
• $4 a gallon
• $6 wasted in idling
• 22 days in a month
• $132 money wasted & increase maintenance expense
• 12 month in a year
• $1,584 a year burnt up, wasted money, pollution 100 trucks
• $158,000 gone, who’s watching. More idle time more money lost. More trucks bigger number

What are your companies next steps? Provide simple, easy to read reporting to your managers and drivers. Put more money in your fuel management budget and save. Need help, Sokolis Group has just started offering this service on a case by case basis. Call now 267-482-6159.

March is here and spring is near.  Still no sign of that cold front I referred to last month, but there has definitely been a skyrocketing of fuel prices!  As a fleet manager, you have to be worried that diesel fuel prices will reach $5.00 by summer.  There are positive signs that the economy is heading in the right direction.  It would be a shame if rising gas and diesel pump prices hinder that.

I’m frequently asked if we get more clients with diesel fuel prices being high, low, or somewhere in between.  Most of the time I’d say, regardless of fuel prices we’re busy helping our clients with their fuel management, fuel cards, and fleet management solutions.  However, nobody likes when the prices go up, and I can say we’ve been extremely busy with that as of late.  We like the business of course, but nobody likes taking money out of their pockets.  We’d prefer low prices which would be a win for everyone.

For us it doesn’t matter if oil is $115 a barrel or $75 a barrel.  There is always room for fuel savings.  When fuel is a top 3 expense for your company, it needs to be constantly monitored.  It just becomes more of a priority for companies when the cost of fuel is leaping upwards.

For more information on how Sokolis Group can help you save on your fuel management program please give me a call at 267-482-6159.