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Fuel Management or Fuel Inventory? That is the Question

As we approach the Thanksgiving season and Black Friday, it's time for us to look at where the fuel market is and how it could affect your fuel management program. There are clearly mixed signs in the fuel marketplac

by Glen Sokolis, Sokolis Group
November 19, 2009
Fuel Management or Fuel Inventory? That is the Question

 

4 min to read


As we approach the Thanksgiving season and Black Friday, it's time for us to look at where the fuel market is and how it could affect your fuel management program. There are clearly mixed signs in the fuel marketplace

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. Most view the signs as positives toward stagnant fleet fuel prices or possibly lower fuel prices. Let's take a look at what is going on with fuel inventory management across the world:

• U.S. inventories for gasoline, heating oil (diesel fuel for the fleet management industry) and crude oil are still all close to record high inventory levels. Some weeks we see these fuel inventories dip, and then the very next week they come racing back. One thing everyone should be able to agree on is the fact that fuel inventories have been high and don't look like they will crash anytime soon.

• The U.S. dollar is basically at around a 15-month low compared to other major world currencies. That is not a good thing since fuel is traded in U.S. dollars. This allows Yens and Euros to buy more fuel with less and provides a safe harbor for some investors to put some money away as a natural hedge against the U.S. dollar.

• Floating storage, or crude oil sitting in ships out at sea, has seen its rate rise to over 90.3 million barrels of crude oil. This exceeds the daily world usage and is the first time in recent years that there is more oil floating than is used on a daily basis.

• Unemployment rates hit 10.2 percent, the first time its reached double digits in 26 years. That brings you back to the early 1980s and the Reagan Administration's first term.

• Temporary workers increased to 44,000, showing signs that companies have pushed the envelope with the staff they have and are at maximum production. If history holds true, temporary workers in these types of economies turn into new full-time employees. Certainly 44,000 are not going to touch the 10.2 percent very much, but it is a positive sign.

• China's fuel imports are at their second highest level of crude oil in October.

• The International Energy Agency has forecast that fuel demand in the fourth quarter will see the first increase in over a year. Their projection is up slightly to 86.2 million barrels daily in world oil usage.

It's a mixed bag. The underlying story to all of this in my mind is that crude oil prices are currently over priced by at least $15 a barrel. There used to be an expression called, "war premium" and it still gets used when a new war is about to break out. I believe this fuel market is characterized by an "I'm scared to be short premium" concern. People are worrying that since the fuel market reacts or over reacts to everything in the news, things could shoot up on them and pass them by.

Here is something to think about over the next few weeks. To have a good fuel management plan, it starts with just a plan. Nobody does anything real well without having a plan, especially in something as crazy as fuel and something as important to your fleet management. Start your fuel planning now; make sure your fleet fuel card programs, your bulk fuel purchasing programs, fleet fuel auditing program, fuel insurance (risk management programs) are all in place. If you do these things, your fuel management and fuel planning for 2010 will be ahead of most companies. Good luck, and Happy Thanksgiving.

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.

Previous installments of "Friday Fuel:"
* "Successful Fuel Management Program Equals Discipline", 9-11-09
* "Who's Watching Your Fuel Program," 9-18-09
* "Fleet Fuel Margins: Are You Paying Too Much?" 9-25-09
* "How Do You Audit Your Fleet Fuel Invoices?" 10-2-09
* "Fleet Fuel Price Negotiating: Details, Details", 10-9-09
* "Mobile On-Site Fueling", 10-16-09
* "The Bees Are Still Buzzing: Handling Fuel on a Daily Basis", 10-23-09
* "Fleet Fuel Card Shopping", 10-30-09
* "Is Your Fuel Management Ready for Winter?", 11-6-09
* "Don't Let the Weather Freeze Your Deliveries", 11-13-09
 

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