Managing the Financial Side of Commercial Fleets

How the Pros Control Fleet Fuel Costs

September 2008, by Staff

Even industry veterans who lived through the oil shocks of the 1970s will admit they've never seen today's steady increases in fuel prices. In July, oil soared to a peak of $147 per barrel, and gasoline prices average more than $4 per gallon at the pump (diesel has actually increased above that price).

With fuel budgets already exceeded, fleet managers are scrambling to find ways to minimize the damage. A good fleet manager can take several actions to minimize ballooning fuel costs and even reduce them. There is no "magic bullet." It takes time and hard work, but the rewards can be substantial.


What's Going On?

Although it seems, as Yogi Berra once said, "Déjà vu all over again," there is a distinct difference between the "oil shocks" of the '70s and early '80s, and what is happening today. Those around back then recall the "No Gas Today" signs, odd/even license plate rationing, and block-long lines at the pump. Put simply, those price spikes were supply-driven. Oil supplies were insufficient for refined products such as gasoline and diesel due to the Arab oil embargoes.

A lack of supply leads inexorably to increases in price. However, today, there is fuel for everyone. But demand over the past several years has skyrocketed, not only due to domestic economic activity, but also driven largely in part by the booming economies of China and India. Combined with market speculation that wasn't possible 28 years ago, oil prices at the well have soared.

Background is an important part of understanding problems and developing solutions, but there isn't much fleet managers can do about economic activity in China. They see fuel expense rising, both in total dollars as well as cost per mile, and management wants something done about it. Fortunately, fleet managers have at their disposal far more sophisticated tools to use in negotiation, data capture, and data mining than their '70s predecessors, and there is a great deal they can do.


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