Savings Endure Through a Plummeting Diesel Fuel Price Environment
January 9, 2019
The transportation and supply chain industries have been keenly aware of the bearish crude oil prices that took a dive throughout Q4 of 2018—and even more so, the transportation industry is watching those low prices bleed over into refined products like diesel. A myriad of events led to this deviation from expected fuel price behavior and while the rest of the industry reacts one thing remains certain: Breakthrough Fuel Recovery clients were poised to proactively adapt to changing fuel prices, saving $36.7 million in 5 weeks.
For consumers, low fuel prices are merely a convenient byproduct that makes filling their tanks at the pump less painful. But variance in fuel prices has more amplified effects for transportation professionals. Under normal circumstances, even small fluctuations by a few cents equates to far greater incurred costs in the context of vast supply chain networks fueled by millions of gallons.
Read about key drivers influencing the current low-price environment here.
The Breakthrough team is dedicated to monitoring crude and refined products markets to provide clients with strategic direction. Breakthrough also, however, pays attention to the “spread”—or difference between the national average retail price of fuel and the wholesale price at which well managed carriers most often procure fuel. This “spread” metric is unique to Breakthrough Fuel Recovery clients because it represents the average cost savings they see per gallon.
Breakthrough clients rang in the New Year with the highest spreads – and subsequently savings – of 2018 with a 79.37 cent discrepancy between the DOE Index price for diesel, and the National Wholesale Average price.
In any environment, clients reap the benefits of accurate, timely, and transparent diesel fuel reimbursements, but when the distortion between traditional methodologies and Breakthrough Fuel Recovery are stark, as they are in the current market, the value is amplified. Fuel Recovery clients are continually poised to capture daily fluctuations in diesel fuel prices based on their unique networks, never overpaying or underpaying for the fuel that moves their goods to market.
Spreads exceeded 60¢/gal for 35 consecutive business days, and above 75¢/gal for 9 consecutive business days (November 22, 2018 – January 6, 2019). Those numbers should speak volumes, but let’s better quantify the value of Breakthrough’s market-based approach to fuel reimbursements within this context.
*Over the 5 week period vs. Average Daily Savings
For a client traveling 2.5 million miles over that same period (equating to 30-million-miles annually, and qualifying as a medium-sized Breakthrough client), that equates to $294,000 in diesel fuel cost avoidance in over-the-road shipments alone. That’s 22.3 percent less than the average price paid by equally sized shippers utilizing traditional fuel reimbursements.
If those numbers don’t resonate, these statistics will. Breakthrough clients collectively saved $36.7 million in a 30 day period during the low-price environment. That’s $815,000 per day. Where do those savings come from? Accuracy, transparency, and fair reimbursements.
Learn more about how Breakthrough Fuel Recovery is calculated here.
More than thirty days have passed where conditions enabled significant savings, but there lies an unbounded future ahead to capitalize on accuracy and transparency in fuel reimbursements. As markets ebb and flow, the value of accuracy and transparency is always relevant, and will remain an industry best practice for managing costs within the larger scheme of transportation strategies.
Contact us to discuss your organization’s opportunity as a Fuel Recovery client.