Fuel Flash – September 2018

During August, crude oil prices started the month near $70/barrel but fell toward $65 by the middle of the month.  Prices began rising again during the last half of the month and closed near $70 again.  The following graph shows the daily price movements over the past three months:FF180901

The price decline during the first half of August was mainly due to concerns that economic growth and future demand for oil could be curtailed by the ongoing trade war between the US and China.  In addition, economic sanctions on Iran started to be implemented but did not result in any military response previously threatened by Iran.  As tensions in the Middle East appeared to settle to some extent, upward pressure on oil prices was relieved.

The increase in prices during the second half of August was partially driven by plans for the US and China to resume their trade negotiations.  Although those discussions did not result in any breakthroughs, optimism remained for progress during future talks.  In addition, prices were driven higher by new reports of strong demand and inventory levels continuing to decline.

Due to the way oil prices declined during the first half of August followed by an increase during the second half, the average price for the month reflected only a slight decline compared to July.   Meanwhile, wholesale prices for refined products were relatively unchanged while retail showed slight declines.  The graphs below show the movement of crude oil (converted to gallons) along with wholesale and retail fuel prices over the trailing 15 months:

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Since wholesale prices for refined products remained relatively steady from July to August while retail prices declined slightly, retail margins did not change significantly.  The following graph shows retail margins for diesel and gas over the trailing 15 months:

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Sokolis Group anticipates crude oil prices will continue to fluctuate near $70 for the foreseeable future.  However, there is still a significant possibility that prices could increase sharply over the next few months if supplies from the Middle East continue to tighten due to sanction on Iran and oil inventories decline further.

Looking further toward 2019 and beyond, additional upward pressure on prices is expected because of new rules by the International Maritime Organization (IMO) regarding the type of fuel that large shipping vessels are required to use.  Currently, they use something referred to as bunker fuel which is practically a by-product from the oil refining process.  The IMO’s new rules will require ships to use low sulfur diesel to reduce air pollution which is similar to what happened to trucking fleets in the US a number of years ago.

Assuming no other significant changes in the market, the IMO rules will cause demand for oil to increase significantly by 2020 because many more barrels of oil will be needed to produce additional low sulfur diesel.  In addition, refining capacity, which is already running near peak levels, may struggle to meet the additional demand for low sulfur diesel.

If you’re concerned about the impact of future fuel price changes for your fleet and want to know if you’re receiving the best fuel prices possible, contact Conor Proud at Sokolis Group, cproud@sokolisgroup.com or 267-482-6159.  We are the nation’s leading independent fuel management consulting team and can help you make sure that your fuel management program is running at peak efficiency. 

Fuel Flash – August 2018

Crude oil prices opened July slightly over $74/barrel following a rapid increase after OPEC’s meeting near the end of June.  Prices held steady near $74 for the first 10 days of July but fell back and traded near $70/barrel for the remainder of the month.  The following graph shows the daily price movements over the past three months:

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The rapid price increase following the OPEC meeting in June was primarily attributable to concerns that their agreed upon production increase would not be enough to offset declines caused by economic sanctions on Iran, political turmoil in Libya and Venezuela, and a production outage in Canada.  Overall support for rising prices also continues to be driven by strong global demand while inventory levels have declined.

As the middle of July approached, oil prices declined quickly for several reasons; a significant production increase was reported by Saudi Arabia, Libyan rebels allowed production to resume in some areas, waivers to allow some purchases of Iranian oil were being considered by the US, and the Canadian outage was projected to be resolved by August.

Despite the rapid price increase near the end of June, the decline by mid-July caused the average price of oil for July to only be slightly higher than June.  The average monthly wholesale prices for diesel and gas also barely changed while retail prices declined slightly.  The graphs below show the movement of crude oil (converted to gallons) along with wholesale and retail fuel prices over the trailing 15 months:

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Since average wholesale prices for refined products remained steady from June to July while retail prices declined slightly, retail margins also declined slightly.  The following graph shows retail margins for diesel and gas over the trailing 15 months:

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Sokolis Group anticipates crude oil prices will continue to fluctuate near $70 for the foreseeable future but the possibility of prices rising quickly again remains strong due to significant concerns about supply disruptions from the Middle East.  A primary factor is the implementation of economic sanctions against Iran that are scheduled to take effect in early August.  Those concerns are compounded by recent attacks on Saudi Arabian oil vessels by Iranian-backed Houthis rebels based in Yemen.  As a result, Saudi Arabia suspended oil shipments through the Red Sea’s Bab al-Mandeb strait.

Iran has also made retaliatory threats in response to the sanctions which include blocking the Strait of Hormuz, a major shipping channel in the Persian Gulf, where almost a third of global oil supplies must navigate.  While this tactic is considered extremely risky for Iran, any attempt to block the Strait would likely be met with military action by the US directly and/or US-backed Middle East allies, including Saudi Arabia. If a military conflict does occur in the region, the likely result would be a rapid spike in oil prices.

If you’re concerned about the impact of future fuel price changes for your fleet and want to know if you’re receiving the best fuel prices possible, contact Conor Proud at Sokolis Group, cproud@sokolisgroup.com or 267-482-6159.  We are the nation’s leading independent fuel management consulting team and can help you make sure that your fuel management program is running at peak efficiency. 

Fuel Flash – July 2018

Crude oil prices traded in a narrow range near $65/barrel for most of June leading up to the OPEC meeting on June 22nd. After the meeting, prices quickly rose by over 10% during the last week of June and closed the month at $74.25.  The following graph shows the daily price movements over the past three months:

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Continue reading Fuel Flash – July 2018

Now is a Good Time to Outsource Your Fuel Program!

iStock_000014466508_Small.jpgFuel prices have been increasing rapidly over the last several months. Just one event or change can cause prices to spike or plummet. Volatility will continue in the fuel market as much as it does in the stock market, which can keep whoever is managing your fleet’s fuel program up at night.

Continue reading Now is a Good Time to Outsource Your Fuel Program!

How Often Should You Test Your Bulk Fuel Tank?

If you are managing a large fleet then you have probably found that it is cost-effective to have a fuel storage tank on your property to handle some or all of your fueling needs.

Continue reading How Often Should You Test Your Bulk Fuel Tank?

Fuel Flash – April 2018

During March 2018, crude oil prices traded in a narrow range for most of the month, then started to climb modestly toward the end of the month.  By the end of March, prices gained about 6% from where they started the month.  The following graph shows the daily price movements over the past three months: 

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Continue reading Fuel Flash – April 2018

Pros and Cons of Alternative Fuel Vehicles

Moving away from oil is something being promoted in many areas. One of the debates is the use and production of alternative fuels. For fleet managers, the decision of whether to purchase alternative fuel vehicles means weighing up cost, reliability, and environmental concern.

There are both advantages and disadvantages to alternative fuels, and some things fleet managers should consider:

Continue reading Pros and Cons of Alternative Fuel Vehicles

Is Fueling Time Impacting Your Drivers’ Availability?

Time is money, how many times have we all heard that? We all know it’s true, particularly when it comes to fleet management. The recent changes to the Hours of Service (HOS) regulations have definitely created some challenges for companies that need to maximize their drivers’ productivity.

Continue reading Is Fueling Time Impacting Your Drivers’ Availability?