Gas prices are climbing. What can your business expect to see reflected on its fuel bill?
It doesn’t come as a surprise to anyone that when prices are climbing, gasoline is included. Experts are divided as to whether gasoline prices are going to keep increasing, or finally drop. In this article, we look at the state of gas prices, and what your business can do to help reduce your fuel spend.
Gas prices are at a record high.
As of February, gas prices are the highest they’ve been since September of 2014, with no immediate prospects of relaxing. In the United States, gas prices are nearly a dollar higher per gallon than they were in February of 2021.
In fact, conditions are so grim that head of petroleum analysis at GasBuddy, Patrick DeHaan, believes ”the national average could be pushed to record territory by the start of the summer driving season.”
The rates in Canada are much the same. For example, Metro Vancouver saw gas prices hit a record high in January, with prices reaching 176.9 cents per litre. In Newfoundland & Labrador, residents are comparing gas prices to a second mortgage.
And while demand is also falling across the continent for consumers, hopefully leading to an eventual decline in prices, this does little in the meantime for the businesses who rely on motor fuel for their daily operations.
This is abnormal for winter months.
The surging prices across winter months, in colder regions, has been especially surprising.
As explained by the publication Money, in colder months, “gas stations generally switch to a different blend of fuel that is more suited to colder weather. Because that winter blend is cheaper than the fuel blend sold in the warmer months — and because the demand for gas also tends to decrease when the weather is colder since fewer people are traveling — the price of gas usually falls at this time of year.”
What is behind the climb in prices?
Oil industry struggles at a global level are part of the reason prices are so high. Conflict in oil producing regions, COVID-related restrictions impacting the industry, and supply chain issues all account for these struggles.
Likewise, in mid-February, the Energy Information Administration reported declines in inventories of both crude oil and petroleum, despite gasoline reserves being on the rise. Why does this matter? Well, 52% of the retail price of gasoline is based on how much the wholesale crude oil costs.
“As long as the price [of] oil remains elevated, consumers will be feeling it at the pump,” said AAA spokesperson, Andrew Gross in a statement.
Now is not the time to be lax with your fuel spending.
While different experts have different predictions for the price of gas in coming months, your business needs a more concrete strategy to save than hoping costs will come back down. Whether prices are going to rise more or finally fall during the coming months, your business should be prioritizing optimizing this spend where possible.
Let’s look at a few different strategies you can use to bring down your gas spend.
Fleet cards.
A fleet card (or fuel card) is a type of payment card that allows for easy management of expenses associated with company-owned vehicles. Fleet cards are designed to be used specifically for expenses related to managing vehicles. Businesses such as trucking companies, ridesharing services, or delivery providers will often issue fleet cards to employees who use and operate corporate vehicles. This helps to cover fuel, vehicle repairs, and maintenance expenses.
Fleet cards will help your fuel spend in the following ways:
- Accurate records and flexible reporting – fleet cards enable owners/managers to stay informed of all business-related expenses via real-time purchase reports.
- Spending history and budget control – because each fleet card is linked to an individual employee, a business can use their transaction information to monitor spend efficiency and fuel consumption, potentially reducing overall company fuel expenses and allowing for more accurate budgeting estimates.
- Fuel discounts – many fleet cards that are currently on the market offer additional fuel discounts and regular promotions.
Fleet cards are also accepted at most gas stations, so your drivers will be able to fill the tank when and where they need to.
Route optimization.
Route optimization is a solution offered by several providers which uses software to determine the most cost-efficient route for a vehicle or fleet of vehicles. A good provider’s solutions will factor in every variable that could affect a driver’s route, including, but not limited to:
- Number and location of stops
- Number of deliveries
- Time windows
- Number of turns and intersections
- Traffic patterns
This is difficult work for a computer to do, let alone a human brain. As Verizon puts it, “[w]ith just one vehicle and 10 stops, the number of possibilities is 3,628,800. But if you have a fleet of five vehicles, that number jumps to a whopping 37,267,043,023,296,000. This is why route optimization is mostly performed by computer algorithms and advanced heuristics that can quickly narrow down the options.”
Optimizing your fleets’ routes means less time driving, reduced fuel costs, and increased productivity. All of these things improve your bottom line and make the job easier on your drivers.
Best driving practices.
While it seems mundane, keeping your drivers up-to-date on best driving practices can also help save on fuel. A change to everyone’s day-to-day habits may not have an immediate effect, but over time, it will result in less fuel wasted.
In fact, according to the Government of Canada, adopting fuel-efficient driving techniques can “lower your vehicle’s fuel consumption and carbon dioxide emissions by as much as 25%.”
The government’s five main tips for fuel efficiency are:
- Accelerate gently
- Maintain a steady speed
- Anticipate traffic
- Avoid high speeds
- Coast to decelerate
Other practices to consider implementing include:
- Reducing time spent idling – make it a habit to turn off your engine if you’re stopped out of traffic for more than 60 seconds.
- Keep an eye on tire pressure – underinflated tires can increase fuel consumption up to 4%!
In conclusion…
Right now, there’s very little we can do to control or predict the price of filling up our tanks. However, business must go on. The best thing businesses with fleets can do is be aware, and practice other strategies to help reduce their fuel spend.
