Fuel Smarts

Fleet Execs: Higher Fuel Prices Seen Over Next Year

January 16, 2008

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eyefortransport recently completed a two-year survey of more than 300 North American fleet executives to establish the concerns and strategies of those in charge of fueling North America's fleets amidst concerns over the changing price of oil.

The resulting Fuel Management for Fleets 2008 Report revealed that the majority of fleet executives expect fuel purchasing to become an even bigger challenge, and environmental issues to play a much larger role in their fuel management decisions.
With skyrocketing fuel prices, supply chain issues, new hardware specifications, environmental regulations and evolving technologies, the current climate can be daunting for fleet executives responsible for fueling their vehicles. With this in mind, eyefortransport asked survey respondents to pinpoint the areas that concern them the most, and their strategies for dealing with these challenges.
The industry report that resulted revealed that traditional fuel purchasing strategies are still the most popular, with 26 percent of respondents relying on negotiations with suppliers, 17 percent negotiating with fuel card companies and 14 percent creating and implementing a fuel-buying plan.
Appointing a fuel manager, setting up a limited network, implementing the latest price gathering technology and using risk management (hedging) strategies are still low on the list of active strategies, but are on the rise, each seeing an increase of a few percentage points over the last year.
The majority of executives expect fuel prices to stay high or continue to rise, of which 12 percent said they would remain relatively stable, and 80 percent expect oil prices to rise over the next 12 months. Only 8 percent expect these prices to fall.
One of the more sensitive areas covered by the report is customer surcharging. Whilst cushioning transportation companies, this act of hedging hits customers and businesses where it hurts most, and getting an overview of this uncontrolled cost was deemed one of the main areas of focus for the report. While the hope is that, via hybrids, aggressive fuel efficiency programs, bulk fuel purchases and alternative technology, fleets can limit surcharges in the future, currently 18 percent of respondents in 2007, rising to 28 percent in 2008, divulged that they offset all fuel price increases with customer surcharges. A further 39 percent in 2007 and 31 percent in 2008 said that they cover at least some of the price hikes through this kind of hedging. A nearly even 26 percent in 2007 and 27 percent in 2008 said they do not apply surcharges, but 7 percent each year said they were considering doing so as a way to hedge fuel increases in the future. By all accounts, there will be no great short-term reduction in surcharging practices.
Do North America's fleets plan to respond to increased customer and public pressures to "go green?" According to the 2008 survey a combined 76 percent of fleet executives rated environmental concerns as being one of the most important factors in their fuel management decisions, of which a full 37 percent rate green issues as "very important," and another 17 percent as "a top priority."
When asked how they expect environmental concerns to impact their fuel management strategies over the next three years, another 76 percent said that they will either impact or greatly impact their strategies.
"These results were not surprising, but the consensus numbers were still higher than expected over environmental issues," says Katharine O'Reilly, director of environmental research at eyefortransport. "The fact that over two-thirds of our respondents recognize the impact environmental issues will have on their operations in the near future is encouraging. It remains unclear whether fleets have the knowledge and resources necessary to implement effective fuel management strategies in light of this realization."
In order to survey the current landscape, respondents were asked to rate their current fuel management plans. The self-reported results were unambiguous, with an honest 16 percent reporting their fuel management is "poor." The majority of respondents settled for the middle ground with 45 percent rating their management as "OK," and 26 percent as "good." Six percent can be satisfied with themselves for their self-reported "excellent" fuel management strategies.
To download the full report, visit www.eft.com/fuel/report.shtml .
eyefortransport conducted the survey to celebrate the launch of its Effective Fuel Management & Environmental Strategies for Commercial Fleets Conference scheduled March 26-27 in Orlando, Fla.

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