Is Fuel Cost Just a Game?

Fuel Mangement tested daily with fleet fuel games!

Let’s take a look at what is being said this morning, September 18, 2009. Before we do, sometime’s I feel so lucky that I am in an industry like fleet fuel, fleet management, and fuel management that is ever changing. There is just so many dynamics to it.

Fuel prices weakened Friday, dampened by concerns that a recovery in U.S. demand may be slower than expected and as stockpiles of refined products continued to rise.

Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore, said oil prices were held back by a slide in regional stock markets and a stronger U.S. dollar.

U.S. government data also indicating that economic recovery would be slow, which may mean less demand for energy in the near term by the world’s largest crude user.

Ok, do any of those statements come as a surprise to you, Mr. Consumer, Mr. Fleet Fuel buyer? They don’t to me and I’m a fuel consulting and fuel management expert.

“There is a supply overhang in both crude oil and products. Oil pricing at a $70 plus level is quite vulnerable given the weak fundamentals,” Shum said.

The recession has sapped American fuel consumption, and U.S. oil stockpiles are 14 percent larger than last year. The Energy Information Administration said Wednesday that the country also is sitting on a sea of distillate fuels including heating oil, with stockpiles approaching a 27-year high.

Is this new news? It came out today. Is there any business out there that is really thriving? Sure earnings for companies have been stronger, but so were job cuts a few months ago. Let’s be real when we talk about fleet fuel and stockpiles. They have been there for months, yet the market yo-yos everyday. This makes fuel planning and fuel management no easy task.

Shum said oil has traded within the $65-$75 a barrel since July and is likely to stay within this range in the coming months.

“The price action of the last four months gives some credence to the King of the Saudis’ statement that the fair price equilibrium for crude oil is around $70-$75 a barrel,” Analyst Olivier Jakob said.

“A cold winter would be warmly welcomed by refiners who are struggling to deal with the over supply of middle distillates,” JBC Energy said. It’s only September 18th, we haven’t even played our second NFL football game and we are hoping for a cold winter.

Now, what will probably happen is the stock market will go up in the next couple of days or some company will report strong earnings and all of a sudden, thinks are better and fuel prices are back off to the races.

All I can say is if fleet fuel was priced where I think it should be based on fuel inventory, world fuel demand, current fuel outlook and fuel planning we should be around $50 a barrel for crude oil. Our gas prices should be $1.85 a gallon. Our diesel fuel cost should be $2.10. Of course we help clients buy fleet fuel, do fuel management, fuel consulting, fuel planning and fuel programs. We certainly don’t set the fuel market or speculate on the fleet fuel cost.

For further information, please contact Sokolis Group at 267-482-6155 or or Twitter @sokolisgroup, we can also be found on Linkedin, groups Fuel Management Sokolis Group

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