Key Elements To Fuel Pricing You Need To Know
Fuel isn’t cheap – for most businesses, fuel costs are the highest variable cost of normal business operations. As a result, paying attention to the cost of fuel can make a huge difference to a business’s bottom line. When customers understand the forces that can affect the price they pay, they can better predict future changes and control overall costs.
What Are Jobbers?
Understanding fuel prices starts with understanding jobbers. Jobbers are middlemen who purchase bulk fuel from terminals and sell it to customers and retailers. Jobbers make money by adding a small markup to the base price of fuel, and by offering additional products and services to fleet operators. While fuel is often just a part of the services that a jobber offers, fuel is the core of their business and the services that they provide to their customers. So what affects the price that a jobber sets?
Factors Affecting Prices
The terminal price is the base price of fuel that jobbers pay at the terminal to buy fuel in bulk. That price changes on a daily basis, and is subject to the vagaries of international oil markets and supply. In most cases, day-to-day terminal price changes are small, but these price fluctuations matter to jobbers. Jobbers are locked in to price they paid for fuel until they can move the inventory they’ve purchased.
State and federal taxes are added to that price. Tax rates are different in each state and for different types of fuel. Crucially, fuels that are used for off-road purposes are tax-exempt, and it’s important for fuel users to both use those fuels correctly and track that fuel use accurately in order to file for tax reimbursements.
After these base prices are added, contracted margins and service fees are added to the per-gallon price. Jobbers may negotiate these margins or have standard terms, but generally these fees are determined by the volume of fuel being purchased, the regularity with which that fuel purchase is occurring, and how customers pay for their fuel.
Tips For Controlling Pricing
Fuel price will change on a day-to-day basis as a result of the terminal price. Although customers don’t have direct control over that price, they can still take advantage of those fluctuations. If customers have the storage capacity to bulk buy fuel, buying as much fuel as they can when the price of fuel is low can result in significant savings.
Alternatively, customers can negotiate for better rates by offering better payment terms to jobbers or more precise deliveries. By carefully tracking how much fuel a customer uses and how much fuel they need, customers can help jobbers make more efficient deliveries and better run their business. Creating savings for jobbers in turn creates more room to negotiate fuel delivery rates and lower per-gallon costs.
Tracking fuel use and volumes with the precision necessary to impact fuel pricing is best done with technology. The right fuel monitoring and management tools or fuel dispensing tracking system can automate the process of collecting and organizing fuel data to make negotiating better prices on fuel easy.