Sokolis Group | Fuel savings on diesel fuel prices and fleet fueling

You Probably Haven’t Received Your Full Share of Fuel Savings

Posted on January 9, 2015 by fmsg

For the past few months, we’ve all been watching the price of crude oil decline rapidly. Even when you start to think it’s going to stabilize and can’t go much lower, it goes down even further. As I write this article, a barrel of crude is now trading in the high $40’s which is less than half of where it peaked during 2014.

Fleet Managers, CFO’s, CEO’s along with just about everyone else may be so happy with the lower fuel prices, that they might not even realize they are not getting their full share of the savings. Simple math says that every $42 decline in the price of a barrel should result in a $1 decrease for the largest cost component of a gallon of fuel. Since crude has actually fallen by more than $50, it seems reasonable to expect that we’d see at least that $1 per gallon decline in the price at the pump. But, that hasn’t been happening; at least not for diesel fuel.

According to the historical data reported by the U.S. Energy Information Administration, the current average retail price of gasoline has actually fallen by close to $1/gallon compared to its 2014 peak. It’s a different story for diesel fuel which has only fallen by about 60 cents from its peak. Fuel taxes are different for gasoline and diesel, but they are generally fixed per gallon and the changes that have occurred over the past year are not enough to explain the discrepancy.

So, now you may be asking, “Where’s the rest of my diesel fuel savings?” The answer may be as simple as “In your fuel suppliers’ bank account.” Further proof is provided by the unprecedented growth in rack-to-retail spreads, as they are known in the industry, which are tracked and reported by the Oil Price Information Service (OPIS). These spreads represent the difference in the wholesale price of fuel compared to the retail price in many areas throughout the U.S. Typically, the average spread for diesel fuel hovers around 30 cents, and now it’s grown to more than triple that amount in many areas of the country.

There may be a number of reasons why the price of gasoline has fallen faster than diesel fuel. Some experts believe it is because diesel fuel and heating oil are essentially the same and there is greater demand for heating oil at this time of year. The flaw with that theory is that wholesale prices for diesel fuel have actually fallen much more significantly than retail.

Perhaps the reason diesel fuel retail prices have not fallen as fast as gasoline is because gasoline consumers are much more price sensitive and a greater proportion of consumption is discretionary, like deciding to take a family vacation road trip over the holidays. Alternatively, for businesses with fleets of vehicles that depend on diesel fuel, drivers may not care as much about the price of fuel since the company pays the bill. In addition, a business’ decision to run a scheduled route is more about survival and less about the price of fuel. Retailers could be taking advantage of these circumstances.

You may be happy with the price you’re currently paying for fuel because it’s much less than last year, and probably a lot less than what you budgeted just a couple months ago, but don’t be complacent. You could probably be saving even more. Get in touch with the experts at Sokolis Group and we’ll help make sure you get your full share of fuel savings.

Crude Crumbles

Posted on December 2, 2014 by fmsg

The old expression, “What goes up must come down” is happening again with crude oil. Over the past several months, we have seen a barrel of crude oil go from $107 back in June 2014 to under $65 earlier this week. And, it doesn’t look like the price of crude oil will be rebounding much higher anytime soon. Fuel purchasers should all be benefiting since the price of crude oil has a direct impact on gas and diesel fuel prices.

So what is causing the drop in crude oil prices? Supply and demand. Simply put, there has been a larger supply of crude oil in the marketplace than what has actually been required. Demand has been declining primarily due to a slowdown in world economies, with China as one specific example. In addition, continual improvements in fuel efficiency have helped lower demand.

At the same time, supply has been growing, particularly as the U.S. has worked its way toward energy independence. The U.S. is not completely there yet, but rapidly growing domestic shale oil production has provided abundant results. That additional supply has helped drive crude oil prices down over the past year.

Then, we experienced the most significant drop in crude oil this past week thanks to OPEC. Last Thursday, they announced that there would not be any reduction in their production quota for crude oil. Their members, including Saudi Arabia, Iran, Iraq and Venezuela just to name a few, decided that it was better to hold production levels steady rather than possibly allowing its nearly 40% market share to continue to erode. It’s an interesting strategy that may partially gamble on the price of crude oil becoming too low for some U.S. production to be profitable. As a result, those supply sources would ultimately be eliminated and the price of crude would start to rise again assuming demand remains consistent.

What will happen next is really just a guess. Most analysts believe crude oil prices will continue to fall, but there is no consensus on how low they will go. At this point, I haven’t seen any reports saying crude oil will be rise back to $80 a barrel by the end of December. Of course, that doesn’t mean it can’t happen… this is oil we are talking about. Unforeseen events like natural disasters and political turmoil can have a significant impact on the market. However, the more likely events that would drive demand back up to supply levels would be a very cold winter in the Northeast, Americans driving more because fuel prices are lower and world economies recovering with an increasing thirst for oil.

So, as they say, “What goes up must go down,” but I say, “When it comes to oil, what goes down must go up.” It’s just a matter of time.

Posted in Diesel Fuel Prices, Fleet Management, Fleet Management, Fuel Management, Fuel Management, Fuel Prices, G. Sokolis Posts, G.Sokolis Posts | Leave a comment

The Pump – November 2014

Posted on October 31, 2014 by fmsg

Winter is coming; a reference to Game of Thrones for any of you fans out there. You know the Starks would be preparing, and you should too. Think about last year and how hard it was on your trucks. I’d usually point to places in the North known for the frigid temperatures as a focal point for this topic, but last year it seemed to affect every state. Here are some things to consider while preparing, if you haven’t already:

Generators – Have your generator(s) serviced. You don’t want to wait until a storm comes and knocks out your power to check if it’s operating properly. Things such as oil, battery, loose wires, loose bolts and fuel should be looked at. If it’s been more than half a year since your generator was last used, drain the fuel properly and replace with new fuel.
Winter additive – Depending on your fueling solution (i.e. OTR, Mobile, Bulk), have a plan or make sure your vendor has one and shares it with you. If using your vendor, there may be an extra cost (usually a few pennies) during the winter months. Explore the option of supplying additive yourself if you can get a better price and trust the product.
Other blends – Keep in mind extreme weather will call for more than just additive. It may cause suppliers to blend with kerosene. This is going to raise your cost of fuel, as well as decrease your MPG’s.
Traveling North – For the long haul drivers that are going down South and coming back up North, keep in mind that the southern fuel stops might not be treating with winter additive. You may want to keep a jug of winter additive in the cab to add with any fuel you purchase, especially when in the Deep South.

If you have any questions or concerns with your winter fuel program, contact Sokolis Group for help.

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Are Your Fuel Prices Stuck on the “Sticky Down”?

Posted on September 29, 2014 by fmsg

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.“

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The Pump – September 2014

Posted on September 8, 2014 by fmsg

When it comes to fuel, improving efficiency is important, but lowering the price you are paying can have a bigger impact. There are a number of things you can change/try in order to increase efficiency within your fleet and I encourage you to look into them. These things include tires, mud flaps, side skirts, onboard computers, additives, etc. Hopefully, the companies selling these products have goals that align with yours; saving money. However, at the end of the day, you’re still going to need fuel to power your equipment. You can buy less of it which will help, but why not attack the bigger cost first?

As I speak with many fleets, I hear many different reasons or excuses to put fuel management on the back burner, and sometimes they are very valid. As I’ve mentioned in the past, jobs tend to get harder, not easier. There is always a continually expanding list of projects, but with a limited number of people to complete them. That is often the reason why there doesn’t seem to be enough time to focus on fuel savings. Unfortunately, you might be missing or overlooking the significant cost to your fleet and company.

For most companies in the trucking/private fleet industry, fuel is one of the top three expenses. Prices have recently been trending downward, but pursuing fuel savings is still a project worth taking on. If prices were constantly rising it might seem like a higher priority, but don’t let the recent decreases fool you. We all know this is a volatile market and fuel prices will be on the rise again.

It’s always a good time to take a closer look at your fuel program and Sokolis Group is ready to help. Let us perform a free, no-obligation audit of your recent fuel purchases to determine if there is an opportunity to save money. We won’t take much of your time and we’ll do the heavy lifting from there.

If you’d like to discuss fuel savings opportunities with us in person, here are a couple upcoming conferences we’re exhibiting at: McLeod Software User Conference in National Harbor Washington, D.C. during mid-September, followed by the ATA Management Conference in San Diego during the first week of October. Hope to see you there!

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Does Your Fuel Card Deserve Your Loyalty?

Posted on July 28, 2014 by fmsg

There are loyal consumers that will only buy a Chevy, Ford, Mack, Freightliner or International. The loyalty usually comes from favorable experience, thus making them a vocal proponent of their product often boasting that fact with the donning of a hat or t-shirt with the manufactures logo on it. I can’t say I’ve seen a lot of fuel card companies’ hats or t-shirts being sported by their clients. Fuel cards aren’t cool. There’s nothing exciting about them. They’re a necessity for effective fleet fuel management. But, just like your favorite truck, there are differences from one fuel card to another. Each one is best suited for a particular situation based on how it will be utilized.

What we encounter more often than not are companies who have a fuel card that isn’t bringing the value it should. They are using the card because their leasing company sold them on it when they negotiated the lease, or a previous manager used the card so it must be good. Companies often use cards that manage the transaction and report it, but it may not deliver substantial discounts on fuel. You can have the best of both worlds; a card that applies your company purchase rules and gives you discounts that add up, not simple basis points rebated back at the end of a month. Why do you want someone to have your money for 45 days?

Change doesn’t always have to be difficult. Today, the fuel card providers have implementations and roll-out down to a science. Deciding what card works best for you might be the hardest part. Just as Sokolis Group Fuel Management can do a fuel analysis for you, we can also do a “Fuel Card Analysis” to help you determine what works best in your situation, what delivers the biggest value and how to maximize your fuel discounts.

There may be a one-card solution that can handle fuel, maintenance, T&E and get you discounts on fuel that add up, but you may not need all that functionality. Maybe you need a card that integrates with your company’s accounting system. What about acceptance? Maybe you need access to fuel on every corner. Maybe you don’t and you just need help understanding where the most cost effective places are to buy fuel.

We deal with every fuel card that’s out there and can say with 100% certainty, not all fuel cards deliver the value you deserve. If you would like to be sure your fuel card program is the best fit for your situation, please contact Sokolis Group Fuel Management for a no cost, no obligation, unbiased review of your fuel card program.

Posted in Fuel Cards | Tagged fuel card analysis, fuel cards | Leave a comment

Do You Have a “Leak” in Your Bulk Fuel Tank?

Posted on July 14, 2014 by fmsg

Many companies have determined that locating a bulk fuel tank in their own yard provides the most cost-effective method for their fleet fueling requirements. Bulk tanks certainly come with insurance and environmental challenges, but they can be overcome with careful planning. It’s also costly to purchase and install a bulk tank, but significant net savings may be achieved compared to alternative fleet fueling options assuming your tank doesn’t “leak.”

When I say “leak,” I don’t mean fuel seeping into the ground. I’m referring to a tank that lacks a fully integrated inventory tracking process, including a card reader. Without it, fuel will be dispensed from the tank and it will be difficult, if not impossible, to know where it all went. Misuse and theft can easily go undetected without strong inventory controls. The loss of fuel will quickly wipe out any cost advantage of having the tank in the first place.

One of the worst inventory control scenarios would allow anyone in the yard to drive up to the tank and dispense fuel without tracking the driver AND vehicle. A small improvement, although primitive by today’s standards, would involve placing a clipboard and pen near the tank (in a weather proof location) for someone to note their fueling activity. That might work if everyone followed the rules and the clipboard didn’t get misplaced. Also, the back office staff will need to spend the time to rekey all the information accurately assuming they could read the writing on the clipboard.

A better scenario is a tank with a card reader system, but we often see companies with old equipment that cannot transmit information. Fueling transaction data is actually trapped inside the reader until someone physically downloads it. “Memory full” error? Let’s hope it doesn’t result in fuel being pumped without being recorded or we’re back to the worst case scenario.

The preferred solution is to equip the tank with a card reader system that provides fueling data in real-time, whether it be through a wired or wireless connection. In addition, the data should be in a format that is easily integrated into an inventory control system with robust reporting, possibly using a company’s G/L system for full cost accounting and P&L tracking. Modern card readers offer those capabilities as basic features.

If you’re concerned about the cost of investing in a new bulk tank inventory control system, it’s worth noting that there are major fleet fuel card providers in the market that are willing to absorb most of the cost, including installation expenses, in exchange for earning transaction fees over an extended period of time. These arrangements can be very attractive for companies with limited cap-ex budgets. Avoiding the up-front cash outlay can help quickly provide financial returns from improved inventory controls, even net of transaction fees.

If you are interested in learning more about improving your inventory controls and plugging the “leak” in your bulk tank, contact the experts at Sokolis Group Fuel Management.

Posted in Fleet Management, Fuel Cards, Fuel Management | Tagged bulk fuel tanks, fleet fuel cards | Leave a comment

The Pump – June 2014

Posted on June 17, 2014 by fmsg

What is more economical for your fleet, a purchasing card (P-card) or a fuel card? It depends on the situation and the makeup of your fleet. Are you purchasing gas or diesel, or perhaps both? Are you a local fleet or traveling over-the-road? Class 8 tractors or pickup trucks? Do you need to report information to IFTA or track transactions for other reasons?

For a sizeable fleet of tractors or straight trucks, it’s an easy answer: fuel card. It gives you the ability to look at detailed transactions within seconds after your driver makes a purchase. There is potential to negotiate deals and you have much more control of what your drivers are buying. The fuel card will be the best all-around solution offering savings along with all the data you’ll need to keep tabs on your fuel program.

The question becomes more difficult when you have a smaller fleet of trucks or cars (let’s use 20 or less diesel trucks/50 or less gas units). In this instance, you want to consider what is most important to your company. If your fleet’s main concern is saving the most amount of money on fuel, then the P-card is the better choice in most cases. You most likely have a business relationship with a bank and you are using them in a couple different facets. Therefore, they will be willing to offer a P-card with a bigger rebate then you can typically get through a fuel card company. However, this does open the door for potential theft. How do you track purchases when you don’t have all the essential information such as odometer, gallons, and PPG?

Of course, there is more to consider. Accessibility, transaction fees, rebate vs. point of sale discounts, and even customer service. There just isn’t enough time or space to fit it in this blog! Reach out to me if you find yourself in this position. We have the tools and knowledge to analyze the best option for your fleet.

Posted in Fleet Management, Fuel Cards, Fuel Management | Tagged fuel cards, p-cards | Leave a comment

What’s the Cost of Diesel Fuel?

Posted on June 12, 2014 by fmsg

The average retail price of diesel fuel continues to hover near $4.00/gallon. When you look at the total retail price of diesel fuel, it’s important to understand the components of the price to know where there may be opportunities to reduce the cost.

The largest portion of the retail price; just over 60%, is driven by the cost of the crude oil that is refined into fuel. Contracts for crude oil are traded on exchanges like NYMEX and many supply and demand factors continuously impact the trading price. If the price goes up or down, it has a direct impact on the price at the pump.

When you hear about crude trading around $100/barrel, keep in mind that a barrel is the equivalent of 42 gallons. Therefore, $100/barrel is almost $2.40/gallon. And, when looking at it from the retail price, 60% of $4.00/gallon also works out to $2.40/gallon. Extending this math means a $5 change in the price of a barrel translates to 12 cents/gallon at the pump, although there may be a lag in timing depending on inventory levels.

The next largest cost component of the retail price is attributable to refining the crude oil into diesel fuel. This represents approximately 15% of the total price, or 60 cents/gallon based on a $4.00/gallon total price. Based on the national average, Federal and state taxes also represent an additional 15% of the total price.

Regardless of the taxes paid at the pump, every state still collects their share based on the miles traveled in each state. The state tax allocation is accomplished by the quarterly IFTA reporting process that most companies with fleets must comply with. Therefore, a strategy to purchase fuel in a state with lower taxes won’t accomplish much except to defer payment of another state’s higher taxes as a balance due with the IFTA return. Limited exceptions for local taxes present small opportunities for savings, but thorough research is needed.

The various components mentioned above account for approximately 90% of the retail price of fuel and there isn’t much that can be done to reduce this part of the cost. The remaining 10%, or approximately 40 cents/gallon, represents downstream costs added by wholesale and retail distribution activities. Expenses for storage and transportation, facility maintenance and brand marketing along with many other line items must all be covered. Profit is in there too.

Some fuel merchants find ways to transport product at lower rates. Some structure their operations more efficiently which allows them to lower their costs. Others compete aggressively for volume and are willing to sacrifice margins. The point is that roughly 10% of the price of diesel fuel has some play in it. This is where opportunities exist to reduce your cost.

Sokolis Group Fuel Management has many years of experience working with different merchants and can identify when and where those opportunities exist. Even if you think you’re already getting the lowest price possible, let Sokolis Group Fuel Management do a no cost, no obligation audit of your fuel purchases to see if there are additional opportunities for your company to reduce the cost of diesel fuel.

Posted in Diesel Fuel Prices | Tagged diesel fuel prices, diesel fuel taxes, fleet fuel, fuel consulting, Fuel Management, fuel prices | Leave a comment

“Keep Your Eye on the Prize” and a Hundred Other Metaphors

Posted on June 3, 2014 by Sokolis

Yep, you’ve heard them all. “Don’t take your eye off the ball”, “Success isn’t given, it’s earned” or “A goal without a plan is just a wish”. Every one of those were spoken by successful people.

Right now businesses are experiencing some much needed growth. Companies are reporting better than projected earnings. The stock markets are thriving at record levels. Transportation is running over capacity. Things are looking better than they have in years. If you’re one of these companies, congratulations. Your success is well deserved.

Even if you are experiencing success, make sure you stick to your game plan. Continue to focus on what’s gotten you here. Your business objectives, strategic plan, KPIs or any other means you use to chart your key initiatives.

I was speaking with a prospect and was happy to hear their business was doing fantastic. What he said next struck me as very short-sighted. He told me that he was getting rates that were way over his normal ones. He had all the freight he could handle and then some. He didn’t care what he was paying for fuel right now because business was so good and his revenue was way over budget. All he was going to do was concentrate on hiring drivers.

I couldn’t help but think that didn’t seem like a long-term plan for success and it’s probably not going to stay that way forever. The point is, continued focus on objectives that have helped you achieve success should not be set aside when you’re experiencing positive results. Incremental improvements in all aspects of your business are the keys to success and increased revenues.

Fuel is a big part of your expense that has the opportunity to be incrementally improved. When was the last time you analyzed your fuel purchase program? What does squeezing a few more cents per gallon do for your fuel budget?

Allow Sokolis Group to do a no cost, no obligation benchmark analysis and help you determine if there is opportunity to save money on you fueling program.

Posted in Desk News, Fleet Management | Tagged diesel fuel prices, Fleet Management, Fuel Management, fuel planning, strategic sourcing | Leave a comment