Monthly Archives: March 2011
The recession that began in 2008 was deep and profound, impacting almost every business. While most of us had very little to do with creating the recession, we all suffered through the consequences together. Slowly but surely the economy is getting better, and it is time for businesses to start thinking strategically about their next growth cycle.
For any business with mobile assets, one inevitable part of increasing business is increasing fleet expenditures. As business picks up, your fleet gets busier. All of your vehicles will almost certainly add mileage to their monthly averages, which is a good thing as it means that they are usually out adding to your company’s top line revenue. But how much will increasing fuel costs add to the overall expenses?
Diesel oil and gasoline prices have already shot up to their highest levels in two years, and most analysts are predicting a steady increase over the course of 2011 as the global economy picks up steam. The 2011 predictions from most analysts, including the U.S. Energy Information Administration are running in a fairly narrow range centered around a 10% increase over last year’s pricing. Given the global fuel markets, it is a fairly safe bet at this stage to put those figures into the forecast this year. While nobody likes to pay more in fuel costs, this sort of increase as the economy improves is relatively easy to swallow for most businesses as we all ride the wave of an improving economy.
Projections for 2012 Vary Widely
The more important question to answer for fleet managers is whether or not we will see a fuel cost increase in 2012 that mirrors the 30% plus increase we saw in 2008, and whether or not that increase will be permanent this time. While experts disagree on the timing, everyone agrees on the simple fact that supplies continue to dwindle as demand rises. Most of the increased demand in 2008 came from emerging markets such as China and India, and forecasts show that these markets will be increasing their demand again soon as they work their way through the latest downturn. While the timing is still murky, the inevitability of increasing fuel costs make it prudent to start planning for this eventuality.
Four Ways to Decrease Fuel Costs
Here are four ways that a fleet owner can work to reduce his or her fuel consumption over the long haul.
- Smaller, More Efficient Vehicles: This one is obvious and most businesses are looking at overall cost of ownership on their new vehicles as they are added to the fleet. When you look at your cost of ownership projections, be sure to calculate them at several different fuel cost estimates.
- Route Monitoring: Having the ability to monitor your vehicle locations allows you to insure that they are running their routes efficiently and that your corporate vehicles are not burning fuel for an employee’s personal benefit rather than your own. Personal side trip expenses in the work truck can really add up.
- Reduce Speeding: Everyone knows that the faster a vehicle goes, the more fuel it consumes. Not only is this an operational cost issue, but it also greatly increases your risk liability for everything from speeding tickets to accidents .
- Control Engine Idling: Studies have indicated that a typical work truck can consume anywhere from 0.7 to 1.2 gallons of fuel for every hour that the engine is left running idle. While this is sometimes necessary in extremely hot or cold environments, most often it is a cost that is easily avoidable when the proper monitoring measures are put into place.
So, What About That $5/Gallon Fuel?
My guess is that 2012 is not the year that we will see it. Only the most pessimistic of forecasters see it coming sooner rather than later. But I do believe that it will be here soon, certainly within the next five years, so it is time to start putting that eventuality into the strategic planning for your fleet. If you don’t, you could end up with a bunch of vehicles that cost you much more to operate and depreciate much more rapidly than your competition’s fleet.