Managing fuel is a vital part of a fleet manager’s role: It’s the largest expense in fleet management. Having a model to predict fuel costs, using technology, and making adjustments when prices get high are a few keys to managing fuel well.
A Budget Model that Works
Predicting fuel costs is like pinning water to a tree, as one fleet manager said. But another fleet manager has come up with a model that works much of the time for his fleet.
Bryan Lucas, manager of Orange County, Florida, fleet management, has a system he’s used for years to predict fuel costs for his fleet of nearly 2,000 on-road vehicles and about 1,900 off-road vehicles and equipment. More than three-quarters of those use fuel. Orange County compares weekly national fuel price data from the U.S. Energy Information Administration to historical price data from the county to help forecast future prices. In addition, Orange County’s fuel contract uses weekly prices as opposed to daily prices. It’s something Lucas says other fleet managers are always shocked to hear. He says the contract works so well that other area governments piggyback off that contract. While it’s not a flawless system, it is something Lucas says excels for his county.
“Is it super accurate? No. Is it better than shaking a Magic 8 ball or spinning a dartboard? Yes. It’s done really well for us,” he says.
After the fuel vendor determines the price for the following week, Lucas has employees work over the weekend to top off tanks for fleet vehicles if the price is expected to increase.
“You pay a few hours of overtime on a Saturday, but save tens of thousands of dollars of fuel,” Lucas says. “It’s a win for everybody.”
Value in Tech: No Risk of Human Error
Using a fuel management system is crucial, Lucas says. Having technology that collects data from vehicles like mileage, who’s pumping fuel into the vehicles, where they’re filling up the vehicles, and at what times helps fleet managers have a clear understanding of fuel usage and ways to save money on it.
It also prevents drivers from filling up their vehicles with the wrong kind of fuel, Canaveral Port Authority Fleet Manager Brian Carroll, CAFM, says. That can be a costly mistake. Carroll manages a fleet of just over 100 on-road vehicles and about 60 off-road vehicles and equipment.
Perhaps the biggest advantage to having fuel management technology is the lack of risk for human error. Before moving to the technology, Carroll’s employees were required to record data on their own. This is something employees would oftentimes forget to do, Carroll explained, leading some to write down numbers like “1234.” Not having the correct data can be detrimental to fleet managers.
Advanced fuel management systems can also lead to a decrease in fuel theft, Carroll says. The technology installed in the vehicles in his fleet communicates with the fuel management system. Employees are also required to present a chipped badge to a proximity reader prior to pumping fuel. Additionally, cameras installed at the fueling stations record all activity.
Lucas is determining whether to get an updated version of the current system he uses, or whether to choose a new vendor. He is moving to a new fleet management system, and looking for a fuel management system that can be integrated into that is vital, he says.
Adjusting to Higher Fuel Costs
Adjusting fuel budgets is nothing new for fleet managers. Outside events affect costs regularly. Most recently, the conflict in Ukraine led to a spike ;’p;=-n prices. Carroll has adjusted his fuel budget this year already. His budget has nearly doubled compared to last year.
Law enforcement agencies also have changed their operations and incident responses due to higher costs. In June, the Isabella County, Michigan, Sheriff’s Office was forced to cut back on its in-person call responses, according to its Facebook page. The sheriff instructed his deputies to attempt to respond to some calls over the phone when possible.
Other agencies, like the South Zanesville, Ohio, Police Department, have also made changes. The department reported to Fox News over the summer that it was forced to cut back on patrols. Instead, officers conduct stationary patrols, parking their patrol vehicles in a visible area as opposed to driving around.
The Borough of Flemington, New Jersey, scrutinized its take-home fleet more closely. During the early days of the Ukraine conflict, councilmembers approved a resolution requiring employees with take-home vehicles to keep a weekly log of their mileage, the necessity of the vehicle use, and the date and time of vehicle use.
Best Practices for Saving on Fuel
Aside from making recent changes as a result of the higher costs, these fleet managers have some well-established practices that lead to savings.
Lucas emphasizes preventive maintenance for his fleet. The fuel data recorded by his fleet’s fuel management system is a crucial part of that. Lucas determines when vehicles need preventive maintenance based on things like mileage. While Orange County has a relatively older fleet, the vehicles are well-maintained and run as efficiently as possible, thanks to regular preventive maintenance.
Orange County also has a license in place from the State of Florida to allow for the use of dyed diesel fuel on all diesel vehicles and equipment because it saves a portion of the added taxes.
All of Orange County’s customers go through general defensive driver training to use vehicles in the fleet. Many of the vehicles also have dashboard cameras that record video inside and outside vehicles. Lucas believes customers drive better because they know they are being recorded.
Idle reduction is a focus for many fleets, including the Canaveral Port Authority fleet. Carroll uses a GPS system that tracks vehicle idle times. He sends emails to the department heads about how much time their employees are idling. In some cases, Carroll says the employees don’t even realize they are idling until they are told.
Carroll says that the facilities department also uses the GPS system to dispatch technicians based on distance to a repair.
“Granted, the port is only three miles, but I’d rather have somebody half a mile away take the job instead of somebody three miles away,” he says.
OPIS vs. Hedging-Based Fuel Contracts: Which is Better?
Most fleet managers use fuel contracts with prices dependent on the Oil Price Information Service (OPIS) price. However, some negotiate a “hedging” contract, with a single set price for the year. So which is better? Well, it depends on who you ask.
Larry Campbell, CPFP, director of fleet operations for Fort Wayne, Indiana, was able to lock in an unleaded fuel contract for $2.97 per gallon for 2023; diesel fuel will be priced not to exceed $4.50 per gallon. The diesel price includes both the state and federal diesel taxes. When determining whether to lock in a price or use an OPIS-based contract, Campbell explains that it ultimately came down to budgeting, since the OPIS price is not one you can control. He says it’s harder to budget based on the OPIS price since it fluctuates so much.
Dan Berlenbach, CPFP, fleet services manager for Long Beach, California, says when it comes to choosing the kind of fuel contract to use, it depends on a fleet’s “appetite for risk and amount of in-house expertise in both fuel contract management and the commodity market.” Berlenbach explained that in most fleets, with staff and management busy with day-to-day operations, staff shortages, increasing environmental regulations, and supply chain shortages, they may not have time to invest in managing and researching a set price contract. That leads many fleets to choose easier processes, like OPIS-based contracts. Berlenbach agrees that having a fixed-price contract does have value, “in that your fuel budget is 100% predictable for the year.”
The Bottom Line
Fuel management isn’t the easiest part of a fleet manager’s job. But when done well, it can lead to more efficient operations, less human error, and even savings.