Expect the Unexpected For Diesel Fuel Prices and Gas Prices

I was going to write an article on Friday about what happened to all of those people, who way back when, predicted $100 a barrel for crude oil and increased diesel fuel prices and gas prices right along with it. In fact, I admit, I was one of those people. Wasn’t almost everyone? Well, many things have happened since then.

• Crude oil prices did make it to $93 a barrel, then retreated back to the mid-to-upper $80’s
• Gas prices continued to go up
• Diesel fuel prices went higher too
• Revolution erupted in Egypt, a key supplier of crude oil
• Worries heightened for everyone as domino effect of civil unrest spreads in the Middle East
• Fuel supply remained strong in the U.S.

If not for the big turn of events in Egypt, the Middle East probably would have remained calm (or at least as calm as the Middle East can be). Other countries such as Libya, Bahrain and Tunisia have jumped on the revolution bandwagon. The uprisings have lead to a trickle down effect that could turn out to be a real horror all the way across the ocean to gas pumps here in America. Pun intended. Although it’s not an oil producer, even Bahrain has international traders closely monitoring its country’s political tensions. The U.S. has important strategic interests there, including the positioning of our U.S. Navy’s Fifth Fleet tasked with patrolling oil shipping lanes and monitoring Iran. You can feel your fleet fueling budget increase with almost every paragraph. And, there’s more unsettling news. Iran is attempting to send its war ships through the Suez Cannel in order to provoke a response from Israel. Why? To take the focus off of its own internal unrest, and put the spotlight on Israel. It’s one of those situations where the people of Iran might say, “I hate my government but I think I hate Israel more.”

Feeling helpless? Wondering what you are going to do? You certainly can’t control global happenings, but you do have the power to get a grip on your company’s fuel management. Now is the time to figure out what’s best for your fleet fueling. Here are more reasons not to delay:

• Libya threatened on Sunday to cut oil exports to western countries within 24 hours unless authorities stop what they called the “oppression of protesters”
• Major oil companies did one better and pulled workers from Libya because of the hostile threats
• Oil reserves from OPEC are at their lowest level in 2 years reports the EIA

Saudi Arabia supplies about 12% of global oil production and sits on at least a fifth of the world’s oil reserves. Saudi Arabia faces the same problem that was a major driver of the protests in Tunisia and Egypt to begin with: youth unemployment. Data by the Central Department of Statistics & Information (CDSI) estimates that 39% of Saudis between the age of 20 and 24 were unemployed in 2009. The world’s oil supply does not have enough room for margin when it comes to fuel management supply. Therefore, if these interruptions happen and go on for any length of period we could easily see crude oil prices of $125 – $150 per barrel.

To think just a couple of weeks ago, it looked like all of the fears of $100 crude were just that. I had called it a special energy that people wanted to see $100 crude. The fact is now, most people are really nervous. This is not a supply and demand issue that people thought would push diesel fuel prices higher. This is civil unrest. If fueling prices push that high, the only thing fleet companies can do is to control the controllable. What I mean by this is simple:

You can’t control fleet fueling prices going up to $4.00 or $4.50 a gallon. Not unless you have some kind of fueling hedge in place. What you can do though is control your gas and diesel fuel prices in other ways. I’ll share some of my expert advice with you here:

• Buy diesel fuel better through your fueling vendors.
• Reduce idling on your trucks.
• Increase your fleet management by making sure, trucks are running at optimal performance.
• Fleet managers should provide additional driver training on shifting, braking and speed management.
• Consider mobile fueling vs. fueling at a retail station. It’s not always about what diesel fuel costs but what does it cost you to fuel your trucks. For most fleet companies there is an out-of-route mileage component and a labor cost. If mobile fueling can cut those costs down or eliminate them, how much additional overall fuel savings do you have?
• Evaluate back office and frontline controls. Ask yourself: What controls do you have on your fuel card program? Is the fueling information coming from your fleet card easily integrated to your accounting system? Can you take the fuel cards information and put it into your fleet management system or your fuel management system? If these things are easy for your staff then you have waste time that relates to your overall diesel fuel price, right?

If you’re not sure of the answers, or even what questions to ask, it may feel like it’s time to run to the closest bridge and jump. But don’t. Be assured, there is help available. Let’s face it, cooler heads will prevail. If you’re ready for some expert advice or direction, Sokolis will help you manage the unexpected. 267-482-6160, gsokolis@sokolisgroup.com