Saving Fuel: What Works, What Doesn't

There seems to be no end to the rise in both oil prices by the barrel and gas prices at the pump, and fleet managers, more than ever before, are focusing on the challenge of controlling fuel expense.

Experts and nonexperts alike promote any number of strategies, along with gadgets, additives, and complex financial transactions. Fleet managers can be forgiven if their heads are spinning, trying to determine the path to control. Looking through tavailable methods, it isn’t be surprising that even though there’s no "magic bullet" that will save fuel, some hard work, common sense, and data mining will bring measurable results.

Cost vs. Expense

Running a fleet of company vehicles produces expense: fixed expense ,such as depreciation and insurance, and variable expense such as maintenance, repair, and fuel. These costs are a function of what is purchased, how often, and price. Fleet managers can have control over the first two and some control over the last.

The point is that controlling fleet fuel expense involves more than just looking for the least-expensive fuel or using the most fuel-efficient vehicles. It is a combination of all three factors.

The current rise in oil prices, and subsequently fuel costs, is very different from that of the late 1970s. The twin gasoline price spikes of the early and late ’70s were supply-driven; that is, prices rose because supply was choked off by the OPEC oil embargoes. Anyone who lived through that period can remember "No Gas Today" signs, rationing (odd/even license plates), and cars lined up for blocks at gas stations across the nation.

Today’s price hikes are demand-driven. There are no shortages of refined products at the pump; no one is waiting in lines; and stations aren’t running out of product. A sustained period of economic growth has driven demand very high, and it isn’t just demand in the U.S. driving prices upward. Huge demand in the booming Chinese and Indian economies are a large part of the issue as well, particularly in what is now a far more global market than three decades ago.

Whatever the reason, fleet managers are feeling it, and feeling it hard. Fuel budgets are spent as assumptions for prices made last year have been left in the dust. When senior managers demand cost reductions, fuel expense is a natural target. Savvy fleet managers who look to all three of the aforementioned factors — what, how much, and how often — will find savings.

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It’s All in the Data

Every time a driver purchases fuel, a great deal of data is generated. When fuel is purchased using a fleet fuel card, it can be broken down into three levels:

Level I. Merchant name, address, date, time, total amount spent, and card number.

Level II. Level I, plus vehicle or driver ID, and sales tax.

Level III. Levels I & II, plus line-item detail, fuel grade, cost per gallon, number of gallons, odometer entry, and PIN.

A single fuel transaction can create as many as 60 or more individual data fields, and it is in this data that fleet managers can find savings. This data contains the what, the how often, and the what-it-cost information upon which a fleet manager takes action.

We can begin with the "what" of fuel purchased and project how it might impact expense. Was the purchase regular or premium? Was it self or full service? These are key questions, and here’s why:

Take a 500-vehicle fleet, averaging 24,000 miles per year and achieving 20 mpg in fuel efficiency. If just 10 percent of all fuel purchases are unnecessary premium fuel purchases, the fleet can be wasting as much as $12,500 per year (assuming a 20 cents per gallon difference between regular and premium). Similar differences can be found between self- and full-service purchases.

The "how much" is also an important consideration. How much covers both the cost of the fuel as well as the amount purchased.

Fuel prices can vary wildly even in local areas. Differences of $1 per gallon or more can be found within a state or even a local area. Tools are available for drivers to search for the lowest prices. Fuel card providers often provide them, and public search sites can be found on the Internet as well. Conservatively, if a fleet manager can get drivers to shop for lower fuel prices, and the overall result saves a mere 5 cents per gallon across the board, the savings adds up to $31,250 for our sample 500-unit fleet.

The other "how much" factor concerns the number of gallons purchased in a particular transaction. For example, in a fleet that consists of four-door sedans with a fuel capacity of 18 gallons, any single transaction revealing a purchase of more than 18 gallons should be investigated. Fuel card providers permit a fleet manager to note the capacity when cards are issued, and an exception report indicates transactions that exceed that capacity.

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A driver who, in a single transaction, purchases 30 gallons, for example, is clearly putting the excess somewhere other than in the company car. Drivers occasionally purchase fuel for other family members, boats, and lawn mowers — all actions that violate most fleet policy.

The sample fleet of 500 units, driving 24,000 miles per year and getting 20 mpg, purchases some 600,000 gallons per year. Assuming (again, conservatively) that just 1 percent of the total buy (6,000 gallons) is fraudulently purchased as indicated above, another $18,000 in savings is possible (using an average of $3 per gallon).

‘Slippage’ Occurs in Many Ways

In the fuel business, slippage is a term referring to transactions such as those previously described (premium and full-service purchases, and quantities greater than tank capacity), as well as others such as excessive "velocity" (large numbers of transactions in a short period of time) and nonfuel purchases.

Fuel cards, as well as purchasing or T&E cards, are sometimes set up to enable the driver to purchase nonfuel items, such as oil, flat tire repairs, car washes, wiper blades or fluid, and other minor, but necessary, fleet items. Unfortunately, this allowance also opens the door to the purchase of food, beverages, lottery tickets, and tobacco products, none of which fall within fleet policy. Limiting or eliminating this waste is another area of potential savings.

The simplest method is to use a fleet fuel card and designate the cards "fuel only." If a fleet card isn’t used, exception reports that indicate product codes other than fuel, as well as fuel efficiency outside the fleet norm can be useful. Ultimately, fleet managers should be able to track transactions that are out of the ordinary: unusual dollar amounts, quantities greater than the vehicle’s tank capacity, velocity, and other "slippage" that can reveal savings opportunities.

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Train Efficient Drivers

The single most important and effective fuel-saving activity any fleet manager can do is to make sure drivers are properly and consistently trained to drive efficiently.

• Avoid excessive idling.
• Accelerate and stop smoothly, not suddenly.
• Plan trips and routes to eliminate unnecessary driving.
• Drive within the posted speed limit.
• Use cruise control to maintain steady speeds.
• Remove excess weight; a 100-lb. load can reduce fuel efficiency by as much as 2 percent.
• Finally, once the proper vehicle is chosen and drivers are trained to drive efficiently, a consistent, rigorously enforced preventive maintenance regimen completes the process. A poorly maintained vehicle works harder and uses more fuel. Keep all filters clean and replace when necessary.

Change the oil and oil filter according to manufacturer’s recommendations for severe use. Check wheel alignment regularly and make sure brake systems operate freely and properly. Poor vehicle maintenance not only leads to greater repair expense, but can also reduce fuel efficiency by as much as 10 percent.

High Fuel Prices Here To Stay

Although it is as much the volatility of fuel prices that causes fleet managers heartburn, the fact is that fuel prices aren’t going significantly down any time soon. The long-term trend is up, and fleet managers have little choice but to deal with the harsh reality.

A quick recap of potential savings, using our sample 500-unit fleet, reveals that significant amounts are possible:

• Eliminating unnecessary premium fuel purchases: $12,500.
• Shopping for the best local prices: $31,250.
• Tracking/controlling fraudulent purchases: $18,000.

Just these three controls alone have a conservatively calculated potential of $61,750 in direct savings over a year’s time.

There has been interest in quick solutions, a "magic bullet" that knocks down fuel cost via complex financial transactions, but most involve substantial risk and are only useful when a fleet purchases large amounts of fuel each year, or, as in price caps, are not instruments of savings, but of budgeting. These solutions all may have a place in the search for savings; however, nothing is as effective as hard work and common sense fleet management.