By Glen Sokolis, Sokolis Group
The good news about diesel fuel prices is they are only $3.294 per gallon, according to the Department of Energy’s weekly report. Prices could be $4.854, like they were the summer of 2008. The bad news about diesel fuel prices is they are at the highest they’ve been all year.
The lowest cost for diesel fuel prices in 2010 was January 4 at $2.797, so we had almost a 18 percent increase. In my view, we are looking for the same thing to happen in diesel fuel prices in 2011. That would give us a price of $3.89. I don’t know if it will get that bad, but let’s look what is facing us for diesel fuel prices in 2011.
* China continues to boom
* Inventory levels continue to go down
* The economy continues to gain steam, which will increase trucking demand
* Congress is talking about a fueling tax increase
* Worldwide increase in demand
Let’s take a look at each of these topics, and you will soon realize that most of these issues for diesel fuel prices are out of your control. The things that are in your control, like fuel management, fuel cards and mobile fueling, will all play a stronger part in your fleet management in 2011.
What Makes Diesel Prices Rise
China is a topic that will never go away. They have approximately 1.5 billion people. They don’t even put that high a number up in front of McDonald’s. These people are going from pulling carts, to riding motorized scooters, to buying cars. Last year over this year they used 10 percent more fuel. They will continue to grow and cause demand issues on the fuel supply chain and a strain on diesel fuel prices.
Inventory levels had been at record highs for almost all of 2010 but our diesel fuel prices still went up almost 18 percent. Now inventory levels are shrinking. This has a lot to do with the economy getting better. I know we all don’t see it, but the economy — at least the trucking industry’s demand on fuel companies — is getting stronger. Refineries had cut down on products and now need to ramp up to handle what is sure to be a large increase in demand for fleet fueling in 2011.
Tax cuts, tax increases, taxes going sideways … aren’t you sick about hearing about taxes? Obama, Republicans, Tea Party, coffee drinkers, what’s next? I’ve written how I believe we need a fueling tax increase on both gas prices and diesel fuel prices. We need to cut spending as a government, too, but that is not going to get us the kinds of roads and infrastructure that we need for the future. Somewhere in 2011, I think a fuel tax increase will be passed. I don’t know when they will start to collect the money, but it is something that hasn’t been raised in 18 years on the federal level and it’s a measure at least in my view that does something to ensure the safety of our roadway system.
The global economy has been off over the last few years, just like the United States. There is no doubt when our economy is doing well so do the economies of other countries. Well 2011 is going to be a solid turn around year for the U.S., and every other first world country will follow. This will cause increased demand on mostly diesel fuel, because most of the world runs on diesel fuel and not gas. Therefore, diesel fuel prices will be pushed higher.
Now we could also throw in currency and the effect a weak U.S. dollar has on crude oil prices, but we won’t go there. We also won’t go down the road that if we start to blend with more bio fuel in 2011 we won’t need as much diesel fuel or whether that will lower diesel fuel prices.
Is Your Fuel Management Program Ready?
Prepare for the worst and hope for the best. Start to prepare now by reviewing your fuel management program.
Here are five questions to ask yourself about your fleet management.
1. Does my fleet company’s operation actually have a fuel management program?
2. Who does fuel audits from our fuel companies, fuel card and mobile fueling providers? Is it my fleet manger, fuel manager, clerk or no one?
3. Does my fleet fueling program have fuel savings with fueling discounts, fleet card rebates or could my company be paying to much on diesel fuel prices?
4. Within 5 minutes can I look up and see how many gallons of fleet fueling one truck took over the last month or a branch or any information that would be useful?
5. When I think about my fuel management system, do I feel good or do I try to think of something else that will make me feel better?
If your answers to any of these fuel management solution questions did not come back positive, do yourself and your company a favor. Take action now. Don’t wait till fuel prices top $4 a gallon again.
Glen Sokolis is president of Sokolis Group, a nationwide fuel management and fuel consulting company, www.FuelManagementSokolisGroup.com. You can reach him at gsokolis@sokolisgroup.com or (267) 482-6160.
Recent installments of “Friday Fuel:”
* “Diesel Fuel Prices Going Up, Fuel Management Needed If You Want Fuel Savings”, 11/19/2010
* “Bad Fleet Fuel Auditing,” 11/5/2010
* “Fleet Management and Fuel Savings,” 10/1/2010.
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