Managing costs: Keeping rising fuel prices under control

Fuel prices are rising again with some predicting that last year’s average highs of 133.1 pence per litre for diesel and 119.5ppl for unleaded could be exceeded within 12 months.

Despite the deep recession, petrol prices have risen by the second fastest rate on record.

According to the AA, the 5ppl rise over the past month is second only to the 5.6ppl increase at the same time last year when oil prices were above $100 a barrel. It is currently $69.

The price of diesel also continues to rise, although less steeply than petrol. Diesel has already passed the 105ppl mark, with unleaded at 103pppl and there will be further increases.

The chancellor has confirmed he will add a further 2ppl to fuel duty in September. He will also impose a further 1ppl above inflation increase in April next year.

This all means fleets must prepare for a continued upward trend in fuel costs

No policies in place

More than 70% of respondents to a Fleet News poll said they had no policy in place to manage rising fuel prices.

One fleet manager among the minority who are trying to manage rising costs is encouraging drivers to fill up at cheaper outlets.

“We run a ‘buy cheapest’ campaign and actively monitor motorway purchases,” explains Val South, fleet manager at Xerox.

The price difference between diesel and petrol has narrowed significantly, making diesel vehicles more attractive.

However, analysts suggest this is temporary, with the gap likely to widen again as prices rise.

Despite this, the Fuelcard Company says fleets will continue to favour diesel. Jakes de Kock, the Fuelcard Company’s marketing director, says: “Diesel cars have always been recognised as being more economical in terms of consumption.

"In addition, a diesel fleet can save an average 2p to 3ppl extra on pump prices by using bunker/fixed price fuel cards.”

Fuel cards

As well as offering access to ‘bunkered’ fuel prices, fuel cards provide other benefits, says Meryl Gilbert, Arval business development director – fuel.

She says: “Fuel card reporting is the most accurate way to map fleet mileage from a top level down to individual vehicles or drivers.

“Without this information, the fleet manager loses visibility of where drivers are purchasing fuel, how much they are purchasing and fuel consumption performance.”

Neville Briggs, CFC managing director, adds that fuel card data should be used with management software.

“In our experience, the best managerial tools available are fuel cards and fleet software,” he says.

“These allow you to gather accurate data about fuel use, and then analyse that information. In a short period of time, you can formulate a fuel policy that will have quite an effect on costs.”

As de Kock alluded to, some fuel cards allow ‘bunker’ pricing, where a fleet agrees a set price per litre of fuel at the beginning of the month, which will not change regardless of what happens to forecourt prices.

The saving can be as much as 5.5ppl, according to businessfuelcards.co.uk, although the average is closer to 3ppl.

Colin Peters, e-marketing manager at Businessfuelcards, calculates that a 30-vehicle fleet can save up to £7,920, while a typical 100-vehicle fleet will cut fuel spending by £26,400 a year by using bunkered pricing.

“On top of these visible savings, fuel cards also save firms money through the streamlining of administrative costs and by offering added control over transactions,” adds Peters.

All cards should provide data services, but some are going further.

Aimed at smaller fleets, the Red fuel card is teaming up with suppliers of roadside assistance, tyres, servicing and windscreens to give SME fleets discounts that they would not normally be eligible for.

Telematics and fleet management software provides the information to allow fuel management decisions to be made.

“There are a number of ways fuel can be wasted, including excessive speed and braking, taking unnecessarily long routes and idling time,” explains Bill Raynal, managing director of Tracker.

“An effective reporting system allows fleet managers to easily view fuel usage per vehicle and driver behaviour. In addition, fleet utilisation reports should help a business to build a picture of its fleet practices and consider areas for improvement.”

Essential management tool

John Wisdom, sales and marketing director at telematics supplier Cybit, agreed, saying tracking is an essential fuel management tool.

“Organisations can use location and driver performance information to dramatically cut their operational costs,” he said.

“If businesses can cut the distance that their drivers travel by 10 miles each day, every single vehicle will reduce its fuel costs by £65 per week or £3,120 per year. A fleet of 50 can save almost £160,000 per year.”

Fleet manager at Campbell’s Prime Meats, Alex Weir, has seen a 15% reduction in fuel costs.

“The telematics solution has reduced the unnecessary wastage of diesel by flagging up instances of excessive idling and off-route journey exceptions – it has also allowed us to route our vehicles for best efficiency,” he says.

Fleets should look for a telematics system that operates in real time.

This will allow fleet managers to pinpoint where a driver is at any moment, highlighting any delays and how a vehicle is being driven.

But most car fleets will rely on drivers filling up at forecourts.

This means it is essential that managers use tools like the one on www.fleetnews.co.uk which allows them to see average fuel prices by region.

Regional variations can be dramatic. For example, fleets in Northern Ireland and the south west pay the highest price for unleaded at 103.2ppl, while Yorkshire and Humberside based companies pay 1.2ppl less.

East Anglian fleets pay the highest diesel prices at 105.5ppl, while the north west and Yorkshire and Humberside fleets pay the cheapest diesel at 104.1ppl.

Drivers should avoid motorway service stations and fill up at supermarkets. Despite supermarket prices for unleaded rising by 4.6ppl during June, the gap between supermarket prices and the UK average for unleaded is still 2.4ppl.

Effective tyre management is key to lowering fuel consumption.

At replacement time or when specifying new vehicles, consider low rolling resistance tyres which can reduce CO2 emissions by 4g/km, according to Michelin.

And, make it a policy for drivers to check their tyre pressures at least once a week – under-pressure tyres will significantly reduce fuel economy.

Ordering cars with tyre pressure monitors will keep drivers fully informed. Alternatively, fit aftermarket monitors.

One of the quickest and most cost-effective actions a fleet can take, and one that offers some of the highest returns on investment, is eco-driver training.

There are a number of providers, including the Energy Saving Trust (EST) for company car drivers and SAFED for van drivers which offer free or subsidised courses.

It has been proved that even a one-hour course can cut a driver’s fuel consumption by 16%.

The EST also offers fleets a free Green Fleet Review that gives advice to fleets with more than 50 vehicles on how to lower running costs, as well as covering other areas such as reducing environmental impact.

Top tips

Use fuel card and fleet management software Inefficient drivers use up to 20% more fuel than the most efficient. Identify vehicles that use more fuel and look for mechanical defects or other factors that may be causing the problem.

Control fuel buying Monitor fuel prices regularly and ensure your drivers buy at the cheapest outlets.

Communicate with drivers Two-way communication with employees can reduce fuel cost and secure driver buy-in.

Plan journeys Travel and route plan using telematics. Intelligent route planning allowed one fleet (The Commercial Group) to reduce its fleet from 14 to 12 vans and reduce annual mileage by 143,000 miles.

Have a clear fuel policy Set out the way that drivers should operate in order to be efficient. Without giving drivers a clear set of guidelines and clarity around their responsibilities, it is unlikely they will make the most of their fuel.

Vehicle procurement Select the most fuel-efficient vehicles and introduce restrictions on company car procurement to ensure that vehicles provide good economy.

Maintain vehicles Well-maintained vehicles will operate efficiently and ensure that running costs are kept to a minimum.

Low rolling resistent tyres Michelin says they can reduce CO2 emissions by 4g/km.

Have a strict travel policy Get every driver to justify every journey and, where possible, get them to car share, use public transport or video or tele-conference.

Efficient vehicles Move to sub-160g/km vehicles and use electric vehicles or hybrid where appropriate.

Alternative fuels LPG and biofuels can provide cost savings.

Driver training courses available

“Trained drivers will understand how to drive in a sustainable manner and by driving less aggressively they have the potential to reduce fuel consumption by between 10 and 15%,” says Meryl Gilbert, from Arval.

“Organisations can even set a benchmark, using certain individuals or groups of individuals as examples of how to operate.”

SAFED runs eco-driving training for CV drivers: www.safed.org.uk

The Energy Saving Trust offers a smarter driving course that it says will improve fuel consumption by around 15%: www.energysavingtrust.org.uk

Where to go for more information