These days, because of the strong Loonie and lower U.S. taxes, many Canadians purchase as much fuel in the U.S. as possible. If you’re among them, you could be paying unnecessarily high fees to fuel-card service providers.
There are a myriad of third-party billing companies that will report on fuel transactions and charge a fee that varies depending on your monthly number of purchases and has absolutely nothing to do with your volume. Those fees vary considerably among companies — sometimes by as much as 100 percent. It’s important to know which ones will save you money and which ones give you the most flexibility.
The price of lubricants is driven by the cost of crude and base oil prices in the U.S., commonly referred to as the Gulf Coast N100 Paraffinic Base Oil Price. As crude costs increase, so do the base oil prices and ultimately the cost of lubricants. Like everything else, prices are driven by volume but there are certain things to look for.
Ensure your supplier is moving in tandem with the competition. There can be many differences in both the amount of price change and the timing of the price change among suppliers. Knowing what the competition is doing will give you the edge and allow you to challenge your supplier when necessary.
Do you do any warehousing? Operate lift trucks? Then you’ll know that the price of natural gas has followed diesel through the roof. Compared to last winter, the price of natural gas is up 45 percent.
First, tell your people to not abuse the forklifts. No unnecessary driving around. Also, avoid door-to-door natural gas resellers. The best natural gas or any energy related contract is not one that is marketed door-to-door, but one that you have to research.
The same goes for electricity, particularly when buying in Ontario or Alberta (Canada’s two open-access markets). It’s of course not just for lighting, electronic devices and appliances but also electric-powered lift trucks. Don’t leave lights or computers on unnecessarily and be extremely wary about signing reseller contracts. If you’re in Ontario, understand the difference between a smart meter and an interval meter and make sure you know which one you have.
Pricing decisions will be largely dependant on that. Hedging for 100 percent of your power load in Ontario is not advisable due to the natural price protection offered through Ontario Power Generation rebates.
Used for many lift trucks, propane is driven by the price of crude oil and natural gas and very often the price will increase as the gate price of propane increases. In the west it’s the Edmonton gate and in the east it’s the Sarnia gate, which are used as the reference supply points. It is important to know exactly what your gate index is and ensure when the gate goes down that your price follows. Without a pre-established gate index, your price will always go up as markets rise, but often will not come down when markets reverse.
FUEL ROUTING SERVICES:
Many established OTR carriers already use fuel-routing services that show every truck stop along a lane as well as where to fuel up to get the optimum price while taking into account variables such as the minimum amount of fuel you want on board, mileage rating of your vehicles, state road taxes and volume discounts. Some routing services can save you on an average up to eight cents a gallon. With large swings in price, there can be big differences between fueling points and it’s important to know which one is best.
With crude oil rising and falling by several dollars per barrel per day, the rack postings change by several cents per liter. It is essential you have accurate rack-price change predictions by noon each day so you can order or pick up fuel before or after midnight. A $0.05-per-liter change in price is worth $2,500 on a full-load delivery and it’s essential to take advantage of that type of cost saving. (The company the authors work for, for example, offers a tank-management program that provides rack price predictions by 11:00 a.m. each day.)
OIL & GARBAGE DISPOSAL:
Most trucking companies have a waste-service agreement with their local garbage contractor — and those agreements typically outline an established lift frequency and bin size — with those parameters set to the waste contractor’s benefit. They obviously will want to lift your bins as often as possible to generate the most revenue they can.
However, that’s not always the most efficient way to take care of your waste. For example, if waste oil is generated, the disposal costs will vary depending on what the demand is like in the market, which is often dependant on seasonal climate changes. It’s important to keep your eye on it.
If you buy welding gases you’ll find some extreme differences in prices among suppliers, and even between some suppliers and customers. Trucking companies and other not-so-huge customers tend to get taken advantage of because they don’t keep their eyes on the price.
Take note of the tanks being delivered and picked up and ensure that suppliers don’t charge you rental for cylinders that you quite simply cannot account for. Each time a delivery and pick-up occurs, someone from your facility should sign off and verify how many cylinders were dropped off and how many were picked up.
The best time for buying locked-in futures contracts is usually the period from October to March, which is the high-demand heating-oil and diesel season. Prices are exceptionally volatile during that period because of a number of seasonal factors that have to be considered when taking a futures position.
Futures can be a gamble, but moreso if you don’t know what you’re doing. You must have a good read on the fundamental factors in the decision-making equation. Taking into account all aspects of the market, then it’s much less of a gamble if you have your eye on it every hour of the day as professional investors do.
The authors are energy cost advisors with consultants En-Pro International Inc.
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