A Gamble of Gas

April 3, 2018

 

With all the volatility in the oil futures market, and the constant fluctuation with gas and diesel pricing, some contractors are looking for ways to curb gas and fuel costs. Downsizing vehicles is certainly one way. Of course, some vehicles are specific to the industry of choice and cannot be changed to more fuel efficient models due to the inherent nature of their use. However, other types of vehicles can be altered to save on fuel. Sales and management staff don’t need four-wheel-drive club cab trucks. In some cases, downsizing to half-ton (or smaller) trucks can allow these folks to do the same job without the horrendous mileage associated with the big, bad rigs we all used to drive. Sales and some management staff (if previously supplied with company vehicles) can drive Prius-type vehicles rather than gas-guzzling trucks. Some plowing contractors have gone so far as to supply field staff with hybrids in summer and trucks in winter.

Another avenue open to contractors is pre-purchasing gas or diesel fuel in quantities which allow for proper budgeting of such costs. All contractors can project fuel usage by looking at past history. Historical data is normally available to the contractor who has even a rudimentary accounting package in place. Once determined, approaching the fuel supplier about committing to a set amount of gas or diesel for a finite period of time can bring some relief to the volatility all vehicle operators are facing. You will need to have in-house fuel storage in order to do this, but that expense is finite too. Once purchased, these systems can stay in place almost indefinitely.

For example: If you can commit to 100,000 gallons of gasoline, taken over a finite period of time (say, eight months) it is possible to “lock in” your price for that time period. Your supplier makes the same kind of commitment to his supplier, thus locking in his cost. You are stuck with that price, even if the cost of gas or diesel goes down in the time frame you committed too. And, yes – it is a gamble.

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