Public sector fleets and private fleets that are required to meet annual fuel budgets are being offered a new financial service that allows them to fix their weekly, monthly or even annual fuel bill in advance.

Last year, the massive rise in fuel prices left many fleet managers struggling with cost overruns. Some public sector police fleets said they would have to reduce the mileage and number of vehicles they run in order to bring fuel costs back inline with predictions.

Predicting fuel costs is difficult. It is certain that fuel duty will increase in April 2010 (it went up by 2p earlier this year) and VAT will rise at least back to 17.5% and possibly higher in the New Year. But other than that it is speculation on how much and how quickly the cost of the fuel will rise.

Now a new company, Portland Fuel Price Protection, is using fuel ‘futures’ to offer fleets absolute certainty in the fuel costs.

It is offering a 'hedge' or insurance against unexpected fuel price movements, allowing fleet manager for the first time to say with absolute certainty what the company’s fuel bill will be for the coming week, month or year.

The fleet continues to use whatever fuel card provider or even cash payment system it currently uses.

At the end of the period if the fleet has paid more than the agreed amount, Portland will refund the difference. If it pays less, then it pays Portland the difference. No up-front payment is required.

However, a fleet must use at least 10,000-litres of fuel a week.

Oil industry expert James Spencer, Portland’s founder, explained the principle behind the new offering.

"We are not a competitor to traditional fuel suppliers meaning that our customers can obtain their fuel by whatever route they prefer,” he said.

"Our contract with operators - the end user of the fuel - is a separate arrangement which can be seen as an over-riding insurance policy against sudden price movements.

"Essentially we are using our proven expertise in the fuel supply industry to help operators manage future fuel price movements - something most vehicle operators find it difficult to do.”

Portland is already talking to fuel card providers who may also see this as an attractive offering that they can sell on to their fleet customers as a ‘white label’ offering.