Price Protections Help You Predict the Future
Andy West
January 09, 2011
Fuel prices have a funny way of fluctuating wildly over very short periods of time. Even when taken over longer terms, it can be extremely difficult to be effective with your fleet fuel management efforts when the prices you pay for fuel are all over the charts.
One effective solution is to employ a price protection service that will allow your company to benefit from unpredictability of its fuel costs whether the market is forcing prices up or down.
As you consider implementing the insuring effects of a price protection plan, you'll want to be sure you choose a service that provides you both upside and downside protections. If the cost for fuel goes up, will you get paid the difference above-and-beyond your agreed upon top-side price?
You may also want to have protection against the price of fuel fluctuating below what your average costs are. With some fuel plans you are actually pre-paying for your fuel. If the plan you are considering has this as a feature, you may want to consider whether or not it is the most effective choice for your fleet fuel management. When you pre-pay for fuel, you are effectively saying I want to pay this amount per gallon. If you have already paid and the cost per gallon goes down, will you receive a rebate or credit on your account?
The best fuel management systems will allow your drivers to continue paying for fuel, oil, and maintenance with a fleet mastercard, effectively changing nothing with the way they are operating.
However, from the administrative point of view, when you implement a price protection strategy you'll receive protection in the form of payback anytime the average cost of fuel goes above the point you've decided you're willing to pay for.
Another important aspect to be on the lookout for is additional fees and surcharges. Not only do you wish to have your fleet drivers continue with business as usual but you need to understand what the entire cost of price protection participation is likely to be.
If you're going to be hit with additional transaction fees, volume surcharges, or other costs that are not disclosed at time of initiation of the program, you'll be unable to deal with future budget effects. As fuel costs vary, your mileage increases or decreases, or more service vehicles get added to the fleet, you'll want a clear handle on how those changes will affect your fuel management costs.
Being able to plan annual and semi-annual budgets with built in price protections will provide your fleet costs some insurance in case of increased market pricing of the fuel you need to operate your company.
If you're like many small- to medium-sized business owners, you don't want to pass on additional costs to your customers. At the same time, you don't want to absorb unreasonable price fluctuations in the cost of providing your products or services either. Effective use of a well thought out and maintained price protection program will provide you with the financial buffer to weather the fuel pricing cycles that are an inevitable part of your business operations.
By planning ahead with price protection and keeping your customers´ end fees constant, you'll also be winning their trust and admiration. When your clients know you're doing all you can to provide them with the very best service and business management, they are much more likely to reward your company with their continued loyalty.
One effective solution is to employ a price protection service that will allow your company to benefit from unpredictability of its fuel costs whether the market is forcing prices up or down.
As you consider implementing the insuring effects of a price protection plan, you'll want to be sure you choose a service that provides you both upside and downside protections. If the cost for fuel goes up, will you get paid the difference above-and-beyond your agreed upon top-side price?
You may also want to have protection against the price of fuel fluctuating below what your average costs are. With some fuel plans you are actually pre-paying for your fuel. If the plan you are considering has this as a feature, you may want to consider whether or not it is the most effective choice for your fleet fuel management. When you pre-pay for fuel, you are effectively saying I want to pay this amount per gallon. If you have already paid and the cost per gallon goes down, will you receive a rebate or credit on your account?
The best fuel management systems will allow your drivers to continue paying for fuel, oil, and maintenance with a fleet mastercard, effectively changing nothing with the way they are operating.
However, from the administrative point of view, when you implement a price protection strategy you'll receive protection in the form of payback anytime the average cost of fuel goes above the point you've decided you're willing to pay for.
Another important aspect to be on the lookout for is additional fees and surcharges. Not only do you wish to have your fleet drivers continue with business as usual but you need to understand what the entire cost of price protection participation is likely to be.
If you're going to be hit with additional transaction fees, volume surcharges, or other costs that are not disclosed at time of initiation of the program, you'll be unable to deal with future budget effects. As fuel costs vary, your mileage increases or decreases, or more service vehicles get added to the fleet, you'll want a clear handle on how those changes will affect your fuel management costs.
Being able to plan annual and semi-annual budgets with built in price protections will provide your fleet costs some insurance in case of increased market pricing of the fuel you need to operate your company.
If you're like many small- to medium-sized business owners, you don't want to pass on additional costs to your customers. At the same time, you don't want to absorb unreasonable price fluctuations in the cost of providing your products or services either. Effective use of a well thought out and maintained price protection program will provide you with the financial buffer to weather the fuel pricing cycles that are an inevitable part of your business operations.
By planning ahead with price protection and keeping your customers´ end fees constant, you'll also be winning their trust and admiration. When your clients know you're doing all you can to provide them with the very best service and business management, they are much more likely to reward your company with their continued loyalty.
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