Fuel price volatility is one of the biggest challenges in fleet operations. Unpredictable fuel prices can decimate profit margins, disrupt schedules, and force constant crisis management. How can fleet managers gain better control over this critical expense?
Fuel is the lifeblood of any commercial fleet; for most, it’s the second-biggest expense after driver pay. In fact, diesel, the power source for 97% of Class 8 trucks, can make or break a company. But with fuel prices swinging wildly—we’re talking up to 20% in just a few months, as we saw in 2023—fleet managers face a constant battle just to stay afloat.
What Drives Fuel Prices?
Multiple factors dictate fuel prices. Here’s a breakdown of the primary drivers:
Supply and Demand
Basic economic principles govern fuel pricing. In particular, seasonal spikes, global fuel reserves, and shifts in consumer behavior influence what drivers pay at the pump.
Crude Oil Prices
Because crude oil comprises nearly half the cost of diesel, its price is highly volatile, responding to geopolitical events, production levels, and market speculation The impact of this volatility was clearly demonstrated in 2022 when Russia’s invasion of Ukraine triggered a 50% spike in crude oil, resulting in eight months of increased diesel prices.
Taxes and Regulations
Federal and state fuel taxes account for approximately 15% of diesel prices. Federal fuel tax has remained at 24.4 cents per gallon since 1993, but state taxes vary significantly. California leads with 92 cents per gallon, while Alaska has the lowest at 9 cents.
Refining and Distribution Costs
Every step in the fuel supply chain affects the final price, from refining to transport. Disruptions such as refinery outages, pipeline issues, or transportation delays can lead to sudden price hikes.
Managing Fuel Prices with Fleet Technology
While fleets can’t control fuel prices, they can control fuel consumption. The right fleet management technology can help mitigate the impact of price fluctuations.
1. Fuel Monitoring Systems
Real-time fuel tracking allows fleet managers to monitor consumption trends, detect inefficiencies, and identify possible fuel theft. These systems integrate with fuel cards and telematics solutions to provide detailed reporting and alerts for anomalies. Additionally, they track idle engine time, helping fleet operators reduce unnecessary fuel waste and improve overall efficiency.
2. Route Optimization Technology
Optimizing routes reduces unnecessary mileage, minimizing fuel usage. Fleets can ensure vehicles take the most efficient paths by leveraging GPS tracking, AI-driven routing, and traffic data analysis. Dynamic routing can also adjust instantly based on traffic or weather conditions.
3. Driver Behavior Monitoring
Inefficient driving habits, such as aggressive acceleration, harsh braking, and prolonged idling, can dramatically increase fuel consumption. These behaviors often go unnoticed without proper monitoring. AI-assisted dash cams and telematics systems provide a solution by capturing driving data and using algorithms to identify areas for improvement. Real-time feedback, delivered through in-cab alerts or driver performance reports, empowers drivers to self-correct and adopt more fuel-efficient techniques. This technology can significantly reduce fuel costs for fleets of all sizes.
4. Preventative Maintenance For Fuel Efficiency
Regular maintenance ensures optimal lower fuel consumption. Monitoring tire pressure, engine performance, and vehicle health can prevent excessive fuel consumption due to inefficiencies. Predictive maintenance tools can alert fleet managers about potential issues before they become costly breakdowns.
5. Fuel-Efficient Vehicle Technologies
Investing in newer, fuel-efficient vehicles or retrofitting existing fleets with aerodynamic enhancements, fuel-efficient tires, and idle-reduction technologies can significantly improve fuel economy. Hybrid and alternative fuel options can also reduce reliance on volatile diesel prices.
6. Fuel Purchasing Strategies
Fleet managers can use bulk fuel purchasing agreements, fuel hedging, or selecting fuel-efficient fueling locations to optimize costs. Additionally, some telematics platforms integrate fuel price comparison tools to help drivers find the best-priced fuel stops along their routes.
Fuel Surcharges: A Buffer Against Volatile Fuel Prices
Many carriers implement a fuel surcharge to protect against sudden fuel price increases. This surcharge adjusts according to fuel price changes, helping fleets recover additional costs without renegotiating freight rates.
Stay Ahead of Fuel Prices
Fuel price fluctuations are inevitable, but their impact doesn’t have to be. By leveraging fleet management technology—fuel monitoring, route optimization, driver coaching, and preventative maintenance—fleets can maximize fuel efficiency and protect their bottom line.
Want to take control of your fleet’s fuel costs? Contact GPS Trackit today and see how our solutions can help you manage fuel expenses effectively.