“If I could predict fuel prices, I wouldn’t be talking to you right now. I would be on my private island.” That’s a typical answer if you ask someone in the fuel industry about the outlook for diesel.
That’s because diesel fuel prices are influenced by many factors, including:
- Oil supply and demand.
- Geopolitical events.
- Natural disasters.
- Government policies.
Things change constantly and quickly, and as the quote above alludes to, are almost impossible to predict. The best thing you can do is be educated on as many of the factors that tie into diesel as possible and from that, make educated predictions.
6 Ways to Prepare for Diesel Prices
When preparing for where diesel prices may head in 2024, here are some steps you can take:
1. Monitor Market Trends
Keep an eye on fuel industry news, economic indicators, and market analysis reports that provide updates into global oil supply, demand, and pricing trends.
The Organization of the Petroleum Exporting Countries (OPEC) meets a few times a year to discuss adjustments to production. They have a significant impact when they announce increases or decreases, as this affects the global supply, which in turn causes prices to fall or rise around the world.
2. Consult Experts
Talk to industry experts who have the data and information at their fingertips on a daily basis. They will have valuable insights regarding fuel prices and can save you the time of doing the research yourself. Consider subscribing to newsletters to receive important fuel updates.
3. Diversify Fuel Options
Consider alternative fuel options, such as biodiesel or natural gas, that may be more cost-effective or have a more stable price trajectory. Evaluate their availability, infrastructure requirements, and if they may be a fit for your fleet.
4. Improve Fuel Efficiency
Focus on improving the fuel efficiency of your vehicles or equipment. Regular preventive maintenance, driver training, and adopting best-in-class driving practices can help reduce fuel consumption and costs.
5. Budget and Plan for Contingencies
Develop a budget and contingency plan that considers various scenarios for fuel prices. This will help you prepare for potential increases or fluctuations in the cost of diesel fuel.
Take a look at the NYMEX for a longer-term view of where diesel contracts are trading and use that to prepare your different scenarios for the year.
6. Ensure You’re Paying the Lowest Fuel Price You Can
While you can’t control where fuel prices are heading, you can control the profit margins your fuel suppliers are charging you.
Benchmarking your prices to an index such as Oil Price Information Service (OPIS) will help you evaluate the opportunity to negotiate lower pricing. Attempt to work with your current fuel suppliers on a lower margin tied to the local OPIS rack or use the services of an expert to ensure you get a fair price.
Fuel prices are influenced by numerous factors beyond anyone's control, and it is extremely challenging to accurately predict if they are increasing or decreasing. By staying informed, exploring alternatives, focusing on efficiency, and ensuring your pricing is competitive, you can better adapt to potential changes in fuel prices and make informed decisions for your business.
In early January, the futures market shows diesel prices decreasing throughout the first half of 2024. However, we are only one hurricane, refinery fire, or change to the Middle East away from skyrocketing fuel prices. Stay informed, remain adaptable, and be prepared to make informed decisions based on evolving market conditions.
Conor Proud is Vice President, Business Development, for Sokolis Group, a nationwide fuel management and fuel consulting company. He has worked for Sokolis Group for more than 14 years.
This article was authored and edited according to Heavy Duty Trucking’s editorial standards and style to provide useful information to our readers. Opinions expressed may not reflect those of HDT.