Purchasing bulk fuel can be a great strategic business decision, but it can also be an unnecessary expense for some companies. There are several factors to consider before deciding to purchase bulk fuel for your fleet. The following can help you decide if bulk fuel is right for your business.
Why you may or may not need bulk fuel
Bulk fuel isn’t a necessity for every business, and in some cases it isn’t cost effective. If you run a large fleet that operates from centralized locations, like first responder or utility fleets, buying in bulk can help you centralize fuel use. For first responder and emergency services, if a crisis arises, having fuel available is vital not only for your business, but also for saving lives. If you operate a shipping company with trucks spread across the country, it may make less sense to buy bulk fuel unless you can set-up drop-points.
Volatile markets can change things quickly
The oil and gas industry has one of the most volatile markets in the world. The price of oil is affected by politics, various economies, trade, and both man-made and natural disasters. A typhoon in Malaysia could close up the Straits of Malacca, shutting down a major trade route and increasing costs for the transportation of oil. Iran could blockade the Straits of Hormuz and strangle around 40% of the world’s oil production.
Events like these and more take about nine months to a year to incorporate into pricing, which is relatively quick. The reason for the delay is that it takes about nine months to extract, refine, ship, and distribute oil. So, these events are incorporated into the price nine months into the future. This means that your company needs to measure its fuel purchasing decisions against the fluctuations in the oil market.
Fuel contracts may save you money
Contracts can shield you from some vulnerability, but not all of it. For instance, oil prices surged for a few years before the fracking boom took off in the United States and Canada. Then, Saudi Arabia began overproducing oil, which lead to a drop in prices. Contracts can shield you from market fluctuations caused by situations like these. However, they can also trap your company in an unfavorable deal if prices end up doing well.
Negotiating your best price is important
If you decide to get bulk fuel, there are a few things you can do to simplify the process. First, you should know your company’s fuel needs. Take into account delivery schedules, the number of vehicles you’re filling up, tanks you have on-site, and the consistency of fuel use. Your goal is not to exceed these figures, as oil products have limited shelf-lives and you don’t want to lose fuel simply because you can’t use it.
Secondly, you’ll want to look at the price. As discussed above, oil prices wildly fluctuate. Study the markets and geo-politics, and read up on market research reports published by known and trusted sources. Make sure your research is thorough and relies on multiple sources.
Finally, figure out where your supplier gets their oil. Is it from a stable country? Are shipments vulnerable to man-made or natural disasters? Consider whether your fuel supplier is reliable no matter what is happening in the industry.
Looking for bulk fuel for your fleet?
If you are looking for a reliable fuel supplier with excellent prices, contact Kenrick Oil today. We offer a variety of high-quality wholesale fuels, including red diesel and regular gasoline. If your business is in need of bulk fuel or if you want to learn more about any of our Products and Services, give us a call at (800) 299-3991. You can also Contact Us by email for more details. We provide services in Texas, New Mexico, Oklahoma, Kansas, Colorado, and Louisiana.