Understanding your fuel program is very important to capitalize on pricing trends and prepare for the future. A tractor operating 110,000 miles per year, with fuel economy of 5.5 mpg, uses 20,000 gallons of diesel annually. Each one-cent savings in the cost of a gallon of fuel represents a $200 savings per year per tractor.
Most motor carriers have a discount off the pump or cash price or have negotiated a contracted price with a truck stop, chain, or group purchasing program. However, creating an effective fuel management program involves more than just discounts.
Purchasing Diesel Fuel
The most common method truckers use to purchase over-the-road diesel fuel is a fuel card. There are several reasons, including eliminating the need for cash, ease of use, and driver rewards programs. Most fuel cards also offer purchasing reports, reduce the amount of administration time needed from the motor carrier, and offer security protection features on fuel purchases.
However, not all fuel cards offer the same benefits or savings to the motor carrier. Typically, the chain-station fuel cards offer the smallest savings, whereas being a member of a purchasing group specializing in fuel cards can offer much greater savings. I have also found that it is relatively easy to save a few cents per gallon on diesel with chain fuel cards or apps like GasBuddy.
Fleets with an aggressive fuel purchasing program go beyond fuel cards and can save significant money—anywhere from 5 to 30 cents per gallon. This translates into a savings of between $1,000 to $6,000 per tractor. For a fleet with 10 trucks, that could be as much as $60,000 a year. Achieving larger savings requires more due diligence and working knowledge of the motor carrier, including understanding how fuel products are sold.
The futures market is a mostly electronic platform exchange on which buyers and sellers can trade various fuel commodities (on paper) any time from a month from now to 18 months in the future, usually no less than 42,000 gallons per trading block. The Oil Price Information Service (OPIS) has a good resource to help you understand this market.
The spot market is the one-time sale of a quantity of product on the spot, which typically involves quantities in the thousands of barrels at a convenient transfer point, such as a refinery, port, or pipeline junction. Purchases are done in bulk, typically 5,000 barrels (210,000 gallons) to 50,000 barrels (2.1 million gallons).
Terminal or rack sales of product are done by the truckload (typically about 8,000 gallons) at the loading rack of a product terminal, supplied from a refinery, pipeline, or port.
Dealer tank wagon (DTW) involves sales of a truckload or less of product, delivered into storage at a retail outlet.
Retail is fuel sold to the consumer, normally occurring at a service station, convenience store, or other retail outlet.
To find additional pricing information, start with market indices like Diesel Fuel Update via the U.S. Energy Information Administration, Platts, Argus, or OPIS. Fleets can utilize these to gain transparency into the market and understand the mechanisms behind the industry’s current pricing.