Fuel Fluctuations:Take Control Now and in the Future

Jack Pierce and Jeff Whiteside

October 2005

Even economy experts can’t predict the future of oil prices this year. With prices reaching more than $50 and even $60 a barrel, there simply are too many variables at play in the world right now for most financial planning officers to make accurate assessments on fuel costs. In fact many companies have seen fuel costs that are 15 or 20 percent higher than what they budgeted for this year. So how can you plan for your fleet’s fuel expenses with any degree of certainty?

While there’s no silver bullet for cutting costs across the board, there are many steps that corporate fleet managers can take to save money and plan ahead for the future.

Get with the Program
One proven step is to take control of actual fuel purchases with a fleet fuel card. This is a tried-and-true staple of the fleet industry, and it works: LeasePlan USA data indicate companies can recapture up to 15 percent of their fuel costs using cards that help monitor purchases among drivers.

With fuel cards and similar fuel programs, what you’ll see in the short term is savings captured from fuel exception reporting. This allows companies to eliminate "slush” in their fuel costs.

These programs help companies in the following ways:

Companies can track what octane of fuel drivers actually use. If they stay at 87 octane, they’ll get the same fuel economy as they would with higher octane gas—but at a lower rate.

Companies can monitor how much gas employees buy. If they’re buying more than a company estimates they’ll need, it could be an indication that they’re filling up other cars or even gas-powered yard tools.

Companies can keep tabs on what else employees buy. If they’re buying something other than fuel, such as drinks or snacks, companies can take appropriate steps to eliminate the problem.

More for Your Money
After the elimination of slush costs, longer-term management of a fleet’s fuel costs comes from the monitoring and use of vehicles with better fuel economy—and perhaps taking a gamble on the front end of a fiscal year.

You’ll want to consider such things as these:

Locking in fuel pricing by buying fuel supplies upfront for the year. This is one way to hedge against an unpredictable fuel market. Of course, fuel prices are subject to fluctuations, so there is some risk involved. But it’s a safe bet that fuel prices are only going up—not down—in the foreseeable future.

Fuel mileage. Are your drivers getting the best mileage they can out of their fleet vehicles? If not, consider these questions: Are they using the right type of vehicle for their jobs? Are there vehicle maintenance problems that need to be corrected for better performance?

Vehicle selection. Does the vehicle fleet that your company has selected meet the needs of your drivers and their responsibilities? If your employees are driving trucks but could drive cars in some cases, then that’s a long-term consideration that must be addressed.

Under the Hood
One area that might help in the long term is taking a closer look at the vehicle options your company can select from for its fleet vehicles. This might seem like a small thing, but it can actually help to buy options that matter—especially when they affect fuel economy.

Here are some examples:

Do your vehicles have air pressure monitors for tires? Properly inflated tires could save your fleet up to 10 percent of its fuel costs every year.

Might your company consider buying diesel-powered cars? Because it isn’t as refined, diesel fuel is not as subject to fuel price fluctuations, and there are much cleaner versions available today.

Have you considered vehicles with cylinder deactivation? These are big features among some vehicles, and they’re beginning to spread as an option. In V-8 engines, this feature cuts fuel and power to extra cylinders that aren’t used in highway driving, boosting fuel economy again.

Can you buy vehicles that are more aerodynamic or made with more lightweight materials? Both considerations can save on fuel.

About the Author
Jack Pierce is vice president of Atlanta operations and Jeff Whiteside is vice president of Chicago operations for LeasePlan USA. LeasePlan is a global leader in vehicle leasing and fleet management solutions. The company, which manages more than 1.25 million vehicles worldwide, offers clients customized plans for total fleet cost reduction through its technologically advanced products and dedication to proactive service excellence.