Greece provided help last week to the fleet fuel markets helping drive down fuel costs by over $11 a barrel for crude oil and near 30 cents a gallon for diesel fuel. While the diesel fuel cost went down on the open market, at the retail station they actually went up another half cent a gallon, leading some to wonder why. We can tell what goes up fast, always comes down slow, especially in fleet fuel.
Transportation firms enjoyed seeing the crude oil prices die because they know in due time they will be seeing the benefits at the truckstop pump. Unfortunately, for almost everyone as crude oil went down so did everything else, including the stock market, taking a hit for almost 1,000 points at one period of time on May 6.
On Friday, May 7, I got to my office early expecting a very busy day with clients wanting to know about locking in fixed price contracts or anything else that they could do to take advantage of this market dip. I listened and watched (out my left eye) as they talked about how fast all of these trades were being made at one time and that there were problems with the trades. Investigation had already begun by Friday morning. A large chunk of the dip in the stock market that day had to do with computerized trading that have algorithmic trading plugged into the program to sell or buy if certain things happen. This can cause a real mess like we saw, especially if you owned Accenture and watched your stock fall to a penny.
The one interesting and very believable story from last Thursday was that some fat fingered trader mistakenly punched in the wrong number of shares, mis-typing billion instead of million, setting off a panic.
Many times during my fuel management career, I have written articles and have been a guest speaker about mistakes that are never caught in the fuel industry. It doesn't matter if you're buying bulk fuel, truckstop fuel, or mobile fuel, somewhere along the line someone's fingers had to enter or not enter something. In fuel, with so many transactions and such big numbers, it's easy for it to happen, so do you do fuel audits on all of your fuel purchases? Read on.
Friday begins about 7 a.m. with the phone ringing, with people asking for our fuel buying advice. I felt good that if you weren't covered by a hedge of some sort for the next couple of months, Friday was the day to do it. By 9 a.m., some of our clients had given us the approval to buy over 55 million gallons of fixed fuel pricing for them. This wasn't a couple of paper trades but wet fuel purchases across the entire country, one or two contracts at a time.
As midday arrives, I am having an issue with a fuel vendor to whom I gave a verbal approval to buy five contracts a month for 12 months or just over 2.5 million gallons of fuel at the best price he could buy it for. I get his price and in my mind his pricing is off by 10-13 cents a gallon. Since I had seen hundreds of trades that day, I knew how the fuel pricing was lining up throughout the country.
The fuel vendor insisted he was correct to the point, when he intimated that I could be having fuel buyer's remorse. He also forwarded the fuel purchase order from his supplier. I still knew there was an issue. I made calls; I sent e-mails. You name it, I did it.
The whole weekend I kept thinking about this and of course I kept our client informed of what was going on. On Monday morning, I received a call that says, 'Mr. Sokolis you're right and we were wrong. We had several keypunch errors that occurred during that period of time that we didn't even notice until you brought it to our attention.' Several! Several errors! Do you believe that this is a Fortune 20 company? The mistake they made on our client's contract was for only 11 cents but it was on 2.5 million gallons or $275,000 dollars. That is very real money. We brought it to their attention; did they bring it to all of their other clients' attention?
Make sure you fuel audit, and just think of the article I wrote a few weeks ago that listed all of things that can make diesel fuel costs go up. We never mentioned all of the things that can make diesel fuel costs go down. Let's be truthful: would you have really put Greece on your list?
Glen Sokolis is president of Sokolis Group, a nationwide fuel management and fuel consulting company, www.FuelManagementSokolisGroup.com. You can reach him at gsokolis@sokolisgroup.com or (267) 482-6160.
These diesel fuel prices are going to shoot up like the BP rig in the Gulf. Once it starts going it might be hard to stop.