Diesel fuel prices have been rising steadily over the past month. Most of us are accustomed to volatility in fuel prices, but they have actually been relatively stable over the past 10 months. About a year ago, diesel fuel prices were approximately 15 cents higher than where they are now. Then, the price fell rapidly during March 2013 and hovered around an average of $3.90 per gallon across the U.S. until a few weeks ago.
Based on what I’ve been reading, it looks like the increase in prices will continue, at least for the next few months. Supply and demand forces will both be in effect. Although the anticipated end of the harsh winter will help ease demand for fuel oil, as warmer weather approaches, more drivers will be out on the roads increasing fuel consumption. In addition, supply production will be tighter as scheduled maintenance at some refineries gets underway. Mixing in some political turmoil certainly won’t help the situation either.
There are many possible reasons for why fuel prices go up or down. Anytime you see larger changes happening in either direction, keep in mind that it creates a potential opportunity for less reputable fuel suppliers to maximize their margins. When prices are rising quickly, suppliers may be tempted to tack on an extra penny or two thinking it won’t get noticed since everyone “knows” the market is rising. Conversely, as prices fall rapidly, suppliers might be slow to lower their prices (a.k.a the “sticky down”) and grab a few extra pennies of profit along the way.
It’s always important to closely monitor fleet fueling transactions to detect billing errors or potential theft regardless of price volatility. 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 everything and make sure your company does not get taken advantage of. Then you can be confident that your fuel supplier is only smiling because they are happy to have your business at a fair price.