4 Ways to Adapt to Changing Fuel Prices

Fleet managers have always had to contend with erratic pricing on fuel. With the increase in natural disasters and geopolitics creating even more disruption, the need to aggressively manage changing gas prices and fleet operating costs is greater than ever.  We provide tips on how fleet managers can successfully save money and increase the safe productivity of fleet drivers.  The recommendations here apply to fleet managers of both small businesses and large fleets. 

Fuel price variation is a fact of life for fleet managers

As a fleet manager, there is a lot that is out of your control.  Driver behavior, gas prices, the microeconomics of supply and demand, the geopolitics of global oil production, currency fluctuation, extreme weather – all these impact the productivity and profitability of your fleet, yet are impossible to predict or command.

Your fuel cost can swing widely due to an ever-changing concoction of these and other ingredients. It’s a high visibility risk factor because, after depreciation, fuel is the second-largest total cost of ownership expense for most businesses. In fact, fuel can represent up to 60% of operating costs in a company’s total fleet budget. It’s a serious concern for any small business or large fleet manager looking to save money and control costs.

At the same time, despite the lack of control over the situation, your CFO, owner, or bank doesn’t like unpredictable costs. The fleet manager is inevitably in a tricky, high-pressure, and important role. 

Working with a good fuel card solution manager provides you the tools and discounts to help your drivers find the best available gas prices, every day. Comprehensive reporting provides insights and will help you uncover and fix gaps in training, driver practices, route planning, and vehicle performance. Some fuel card solutions provide an additional service of contacting drivers who are spending inefficiently or inappropriately. 

Still, the fact is that fuel prices do fluctuate regularly, and they can also vary widely across the country and even within certain geographic or metro regions.  Anyone who has ever filled up near an airport knows that a dozen miles can often make the difference of 20-60 cents a gallon. Compound that across a large fleet, or even a few commercial vehicles, and it quickly adds up to hundreds or thousands of dollars a month.

Clearly, it’s imperative to be agile in your practices in order to equalize your spending over time.  But what can fleet managers do to influence all these unpredictable factors that contribute to fuel price fluctuation?  We’ve identified four practices that work for our clients.

Stay flexible in your approach to fuel price management

Since so much of what influences fuel prices is out of your control, the key is to build flexibility into your operating model so you can quickly adapt as gas prices move up and down, or natural disasters occur, or a global pandemic causes an overnight total disruption on the entire business model. A flexible approach will allow you to stay level-headed, make the right call, and help your employees and drivers cope with change.

While the price of fuel is impossible to control, fleet managers are able to impact fuel consumption, which helps reduce overall costs. This is where data and reporting comes into play, especially when combined with any vehicle telematics you have in place.  The way to mitigate overall cost is to focus on vehicle fuel efficiency, operating parameters, driver behavior, and incentivizing drivers to fill up at low-cost fuel providers. 

Since the overall cost of fuel is often reported as one line in the budget, and it’s a big number, it’s not uncommon for the fleet manager to be given a directive from the CFO to reduce fuel costs by a certain percentage in the coming year.  Fleet managers then must employ a combination of reducing price-per-gallon (PPG) and limiting instances where drivers are spending more than they should or need to. 

“We work with our clients on the three areas that have the most meaningful impact on fuel spend and driver behavior,” says senior director Frank Cerullo, who heads field sales for WEX in the United States. “These are improved fuel economy per mile, highlighting or limiting premium fuel spend, and providing savings at the pump.”

Utilize fuel card controls to influence driver behavior

Fuel cards are among the most powerful tools available to fleet managers.  More than any other approach, fuel cards influence driver behavior in positive ways for both the driver and the fleet manager.

“The best fleet cards encourage drivers to buy gas at a discount from preferred providers, and the reporting and technology help fleet managers understand and correct fueling habits,” Frank says. “It’s also easy to set parameters to help prevent excessive or unauthorized spending.”

These parameters can make a huge difference for fleet managers by letting you set a daily, weekly or monthly transaction limit, placing restrictions on the type of purchase, and even the time of day purchases can be made, Frank says. Some fuel cards let you cue the fuel pump to shut off after a certain dollar amount.  This approach greatly reduces the reconciliation time for all expenses and can eliminate the need to process and account for expenses outside your rules.  Fleet managers spend less time on expense accounting after the fact, and more time influencing future spending decisions by drivers.

“Are drivers being directed to the lowest cost fuel stations?  We often see that a driver can save 40 cents or more just by driving a few extra miles or using a preferred brand.  Do you have a custom dashboard giving you key metrics for fuel vendor selection and driver actions every day?  Can drivers find the best alternate route quickly if there is a road closure?  Fleet managers can leverage automated analytics to curb errant behavior and lower the overall expense for any size fleet,” Frank says.  

“Fleet managers need visibility into spending at the source, which is why our ClearView scatter chart reports reveal spending patterns and highlight the outliers,” Frank explains. “Sometimes it’s as simple as accessing premium or opposite fuel and limiting purchases in the C-store. Usually, we can help reduce the fuel line item by 15%-20% just through effective management of how the drivers are behaving in the field.

While fleet managers can still be flexible with driver access and your rules by region or type of vehicle or route, it’s easy to see why fuel cards can help save you money, place guardrails on spending, and incentivize driver behavior. This gives you back some of the control lost to market, political, and climate disruption.

Right-size your fleet

It is common for an organization to select too many or too few vehicles for the job. Taking time to analyze business needs and your expected growth trajectory and carefully matching the fleet specs to each job will make a difference to fleet spending in the long run. Getting vehicle selection right can have a major impact on overall costs, as well as fuel efficiency.  

“Are there older, low fuel efficiency vehicles in your fleet?  Do your drivers know how to best drive the vehicles they are assigned?  Many fleet managers are getting higher miles per gallon (mpg) and CO2 emission improvement just by managing vehicles on a regular replacement cycle, moving some older models out and newer models in every year,” Frank says.  “For smaller fleets, improvements in newer model efficiency can start to provide a return on investment through fuel and operating savings within the year.”

In 2022, the competitive retail market for used vehicles is also good news for fleet managers, which might spark some fleet upgrades sooner than routine cycles mandate.  

One caution, Frank continues, is that there is only so much you can do with fleet size before you risk curbing your fleet mission. You must first and foremost address the needs of your business, which is to move cargo efficiently and quickly from place to place.  Every fleet has a minimum vehicle requirement to meet customer demand, and there is only so much efficiency you can squeeze out of the vehicles you have acquired.  

Still, vehicle selection matters a lot. The day-to-day fuel efficiency and driver choices about where to buy gas and vehicle maintenance repairs are often more visible than vehicle selection because they require more daily management. Fleet managers must take a holistic view of operating costs to become most efficient.

Encourage safe driving to control fuel and fleet operating costs

A safe driving training and recognition program can contribute to reduced fuel consumption and decreased emissions. Most company drivers average 20,000 miles a year. Your company’s reputation and bottom line ride along with them for every one of those miles. As is true in any situation, people do what they are rewarded for doing.  

Recognizing success and educating drivers regularly on safe driving habits and practices will have an impact on operating and fuel costs, and it will also build a stronger connection between drivers and the company itself. You may also be able to reduce liability exposure by lowering the incidence of preventable accidents.

There is an opportunity to manage costs for every size fleet, Frank says.  Most people are surprised to know that there are fewer than 500 companies in the US with fleets larger than 1,000 vehicles, he says. WEX works with most of them, along with tens of thousands of other fleets of all sizes and all verticals, from two vans to heavy trucks to our country’s largest urban public service fleets.

The most effective fuel card solution is custom to each business and takes advantage of your local footprint and driving patterns.  “We know drivers don’t cross the road to get to a brand,” Frank says. “The solution has to work for your particular business.”

All fleet cards are not the same, and different types of fuel cards suit the needs of different kinds and sizes of businesses. View WEX’s fleet card comparison chart to see which fleet fuel card is right for you.