Don't be fuelish about cheap oil

Low prices make this a great time to learn how to avoid being nailed by the next price spikeWith fuel prices this summer having neared or broken all-time lows in most of the country, this may seem like an odd time to be exploring fuel-buying options. But not to anyone who lived through the two price spikes of 1996, not to mention the one in 1993, the two in 1990...Today, refiners and fuel wholesalers

Low prices make this a great time to learn how to avoid being nailed by the next price spike

With fuel prices this summer having neared or broken all-time lows in most of the country, this may seem like an odd time to be exploring fuel-buying options. But not to anyone who lived through the two price spikes of 1996, not to mention the one in 1993, the two in 1990...

Today, refiners and fuel wholesalers are awash in crude and distillate (heating oil and diesel fuel). Weak Asian economies, mild weather during the last heating-oil season, and ever-expanding production within and outside of the Organization of Petroleum Exporting 7yCountries have "conspired" to drive down prices. The four horsemen of past fuel price apocalypses - boycotts, wars, new government regulations, and long freezes - seem to have ridden far off into memory's sunset.

Yet each past price jump was generally unexpected. The seeming abundance of oil and, often, low prices before an episode are what leave most buyers unprepared.

Today there are more ways than ever for diesel fuel customers to protect themselves from price surges. That's good, but it also may mean you must do more research into what alternatives make the most sense for your own fuel buying and usage patterns.

For instance, you can subscribe to services that supply daily prices in whatever markets you specify, or get software that purports to pick the best stop that day for each of your drivers. However, these quotation services and optimization programs do not necessarily end the guesswork about pricing.

Fleet managers should spot-check to verify that they are getting actual quotes from all vendors willing and able to supply fuel in a market that day. They should make sure their software is not directing them past truck stops with lower prices, based on criteria (such as driving for a certain number of hours before stopping) that they may not consider important.

Options for how to buy, pay for, and monitor delivery of fuel are growing, too. Fleets that used to refill trucks on their own lots may have dug up their fuel island rather than invest in the expensive new tanks or leak-detection systems required as of next December 22. In some markets, a mobile fueling ("wet hose") service will bring the fuel to them at an overall cost (including wages and truck operating costs) that compares favorably to sending their own drivers and vehicles to a truck stop.

Truck stops and others are beginning to offer new systems, such as radio-frequency (RF) tags and collars, to verify that the fuel a carrier pays for is actually going into its trucks and not somebody else's. In some regions, unattended fueling locations (cardlocks) are growing in popularity, although drivers understandably often prefer the security and camaraderie of truck stops with humans present.

Fleets can buy fuel in bulk for delivery to a given truck stop or chain and have it pumped for a small pumping fee by the truck stop. You can lock in the price of fuel in any number of ways and for any length of time. Purchasing, hedging, and trading strategies can be as simple or as complex as your time or stomach allows.

The bottom line: Expect the unexpected when it comes to fuel costs. Nobody knows if prices will stay at today's relatively low levels (for instance, if Asian economies recover only slowly and oil output stays high), sink even more (say, if the U.S. economy cools but the temperature doesn't this winter), or shoot up again (if any imagined or, more likely, unimagined problem crops up).

But with prices at historically low levels and the cost of money also low, now is a much cheaper time to experiment with different ways of buying fuel than in the midst of a 40 cents per gallon runup.

P.S. Carriers that add kerosene to diesel during a cold snap must make sure that they are buying undyed kero this fall. Federal excise tax rules that took effect July 1 generally require fuel terminals to pay tax on kero or dye it, as they have done for diesel since 1994.

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