Working with the Hand You're Dealt: 7 Ways to Seize Control of Fuel Costs

Fleet managers can’t control the volatile energy commodities markets that often lead to oil price spikes, creating stress for even the most seasoned fleet professional. Just a swing of 5 to 10 cents per gallon on any given day can take a considerable chunk out of a company’s profits. And, as fuel costs escalate, so does the pressure from senior management to slash other areas in the fleet — personnel, vehicle inventory, etc. — to squeeze whatever savings can be achieved to protect the organization’s overall bottom line.

But, while fleet managers can’t choose the cards they’re dealt by volatile fuel markets or geopolitical events, they can take charge of how they actually play their hand, by implementing smarter, tighter management over fleet-wide fuel purchasing and consumption — to achieve the lowest fuel costs possible, whatever the market price might be.

1. Shopping for the Best Fuel Prices and Providers.

If drivers fuel their vehicles offsite, train them to select the lowest-priced provider in their area, not just the first station they come across.

Websites and smartphone applications, such as GasBuddy and MSN Autos’ “Gas Prices”, are useful tools that offer real-time prices at local fuel retailers, equipping drivers to find the nearest station with the lowest prices.

“Utilizing a good fuel finder can save a lot of money each month,” said Kathy Quinn, manager of fleet fuel programs at Donlen, a full-service fleet management company based in Northbrook, Ill., and wholly owned subsidiary of The Hertz Corporation. “I showed one customer how they could be saving almost $100,000 in just one month. While some drivers may be limited to certain vendors due to vehicle size, even saving 25 percent of that amount is significant for a one-month period.”

Quinn also recommended branch managers post the top three “vendors of the day” that drivers should use for fuel purchases.

“You may want to consider giving branch managers incentives to get their drivers to use the best-priced vendors,” Quinn said. “If they have to drive another two or three blocks, but can save a lot, that’s the best choice. We’ve seen large fluctuations in price within a few-mile radius.”

2. Consolidating Fuel Purchases.

“Many fleet managers don’t know that, with bulk fuel purchases (especially when they have multiple locations), they can aggregate that volume and bid it out to fuel suppliers to increase their leverage to get the lowest prices,” said Ryan Mossman, vice president and general manager of fuel services at FuelQuest, Houston-based fuel management, and tax automation technology company that manages more than 19 billion gallons of fuel annually for high-profile fleets such as FedEx, Republic Services, Swift Transportation, and Pilgrim’s Pride Corp. 

“If you plan out your fuel purchases across all your locations and tell the fuel suppliers, ‘Over the course of a year, I am going to buy X number of gallons from you,’ most suppliers will provide a very competitive price, relative to the market. So, aggregate the volume and then comparison shop to get the best buy,” Mossman said.

3. Installing Onsite Fuel Tanks.

Andrew Smith, fleet specialist for 1-800-GOT-JUNK?, a full-service junk removal and disposal company with 176 locations throughout North America and Australia, advised fleets at centrally garaged or parked locations to consider onsite fuel solutions.

“There are many fuel suppliers that will gladly put in a tank — whether for gasoline, diesel, or an alternative fuel — on a property for little to no cost to the fleet, depending on how much fuel you go through,” Smith said. “And, the benefit is that you’re not wasting time and miles driving to and from fuel stations. Frequently, not only are these suppliers likely to deliver the fuel to your site for free, but they’ll supply it at a cheaper price than what fuel stations can offer.”

However, the key to ensuring cost-savings with onsite fueling is maintaining optimal fuel inventory, cautioned Mossman with FuelQuest. “Most centrally fueled fleets that I run across are keeping too much fuel in their bulk fuel tanks, which drives up their overall fuel costs,” he said.

Their typical reasoning, according to Mossman, is the belief that fleets would rather have too much fuel than run out.

“There’s technology, like FuelQuest, that allows fleet managers to get a lot closer to minimal inventory levels without running out, which helps reduce fuel cost and risk,” he concluded.

4. Using Fleet Fuel Cards.

Even with organizations that operate fuel tanks onsite, instances often occur when drivers must purchase fuel from an outside retailer or truck stop. In those cases, a fleet fuel card is an efficient tool to centrally track and manage all fuel expenditures, in real-time, to prevent unpleasant surprises from unauthorized purchases, according to Smith with 1-800-GOT-JUNK?

But, with a wide variety of fleet fuel card programs available, how do fleet managers determine what works best for their operations?

FleetCardsUSA is a helpful online resource, which offers a “FleetMatch” system that, based on answers to a short questionnaire, recommends the fleet card with the features and benefits that best meet an organization’s fueling requirements. Smith also advised fleet managers to consult with their fleet management company (if they use one) for recommendations on fleet fuel card programs.

5. Optimizing Winter Fuel Blends.

Fleets in colder climates, such as the Midwest, Northeast, or Rocky Mountain regions, typically “winterize” their diesel (with an appropriate blend of No. 1 and No. 2 diesel fuels) to keep the fuel from gelling in extreme freezing temperatures.

“While most fleet managers are well aware of the ability to winterize their fuels, it could be costly to overprotect,” said Mossman with FuelQuest. “They may not understand the impact on overall fuel costs. The difference of blending 50/50 versus 70/30, 80/20, or 90/10, can be as much as 50 cents per gallon.” (Note: The less the No. 1 diesel used to fuel a vehicle, the warmer the ambient temperature needs to be for it to operate effectively.)

Mossman said fleet managers tend to over-winterize fuel for peace of mind — to prevent the risk of performance loss.

“We have clients who really only need to protect at 80/20, but the fleet manager says, ‘I’m going to do it 50/50 just to be safe. I don’t care.’ But, they may be safe at 70/30 and they’re spending quite a bit of money over the course of a winter,” he said.

6. Improving Driver Behaviors.

“There’s plenty that a fleet manager can do to reduce fuel consumption, but the biggest impact on fuel economy is the driver,” said Smith of 1-800-GOT-JUNK. who recommended driver training and onboard technologies that help reinforce safe fuel-efficient driving habits.

Quinn of Donlen agreed. “Driving behavior is probably the most common area that, once addressed, can also have one of the biggest impacts,” he said. “Small changes, such as reducing or eliminating idle time and other behaviors that impact mpg, such as speeding, can really make a difference in fuel spend.”

Consider these statistics on driver behaviors put together by the U.S. Environmental Protection Agency (EPA):

• Aggressive acceleration reduces gas mileage by as much as 33 percent on highway and 5 percent in the city.
• High-speed driving. Traveling 65 mph instead of 55 mph consumes up to 20% more fuel.
• Excessive idling wastes up to half a gallon of fuel per hour.

Multiply the fuel losses over dozens, hundreds, or even thousands of drivers, representing a substantial opportunity for cost savings by eliminating those driver habits.

To counter these behaviors, Smith said that 1-800-GOT-JUNK? is in the early stages of testing a dash-mounted visual training device, equipped with gauges that provide immediate feedback to the driver on whether he or she is operating the vehicle within its fuel-efficient “sweet spot.”

“We’ve looked at potentially taking that data and incentivizing around it,” Smith said. “You have different groups of drivers that operate vehicles on different grades and topography, and other factors that affect fuel efficiency. But, if we can look at contests or incentivizing drivers on a monthly to quarterly basis in terms of fuel efficiency, I think that is another route we would like to go down as well.”

According to Smith, in terms of driver training, even the slightest improvement can make a big difference in fuel consumption.

“Are drivers looking ahead far enough to see what traffic patterns are like? Are they still accelerating toward that light when they see that the light is red 500 meters ahead? Or, are they starting to coast to reduce fuel consumption?” Smith asked. “I think the biggest issue for drivers is looking ahead far enough — not just one or two vehicles ahead, but six or so — and seeing what’s happening up there. There’s no point in accelerating if you’re approaching a stoplight, when you can coast and save fuel.”

7. Reviewing and Enhancing Vehicle Specifications.

If the truck is over-spec’d for the application, it’s likely consuming more fuel than necessary, because of the higher vehicle weight and bigger engine. Yet, if the truck is undersized for the job, it could be just as inefficient, if not worse, because the engine and transmission are being strained. The strategy here is to re-evaluate vehicle specifications to uncover opportunities to achieve fuel savings.

Lenny Pusdesris, vice president of truck engineering and specification for PHH Arval, a provider of fleet management, leasing, and maintenance services, headquartered in Sparks, Md., recommended fleet managers take advantage of each vehicle replacement cycle to challenge their existing specs. He offered this three-point checklist:

• Review actual payload weight vs. truck capacity — is there an opportunity to downsize the chassis, without sacrificing payload or safety? 
• Review emerging technologies, such as advanced composites, aluminum, or other lightweight material alternatives to steel, in an attempt to reduce weight and extend longevity of truck bodies. 
• Review the latest developments in alternative-fuel solutions (including compressed natural gas, propane autogas, bi-fuel, hybrid-electric, and all-electric), along with the ongoing expansion of the nation’s alternative-fuel infrastructure, to determine whether the vehicle’s application presents a compelling base case for transitioning to “green” fuel technologies.

It’s this last point that Pusdesris envisions significant potential for fuel cost savings for certain fleet applications.

“Transitioning into an alternative-fuel vehicle is becoming easier, as the product offerings and infrastructure continue to improve,” Pusdesris said. “The easiest step is focusing regionally, or in the states with the highest penetration of fueling stations. These areas are the ones likely offering (or soon to be offering) some level of grant or tax incentive to ease the investment anxiety and shorten the payback. Additionally, study the maintenance interval improvements as part the analysis.”

According to the U.S. Department of Energy’s latest “Alternative Fuel Price Report”, as of press time CNG is $1.70 per gasoline gallon equivalent (GGE) less than gasoline. Propane autogas saves 19 cents per gallon, relative to diesel. 

“I think fleets with smaller territories will do the best with alternative fuels,” said Quinn of Donlen. “We know that many companies are exploring CNG and other alternative fuels for their fleets, and we’re seeing more fleets ordering CNG pickup trucks now. It’s always best to analyze your particular data to see if this is right for your application. “

The Bottom Line

When it comes to fuel management, Mossman with FuelQuest advised fleets to not just react to fuel market volatility, but to take charge with smart planning.

“Be proactive in regards to your whole fuel supply situation,” he said. “If you’re not approaching fuel management strategically, the options and choices you have are going to be limited. The more effort you invest upfront to stay on top of your fleet’s fuel consumption, the better the results you’ll achieve.”