From time to time, NCLGBA looks forward to featuring commentary from industry and government experts on a variety of issues impacting local government budgeting. This post, written by Kevin Keen, Manager of Fuel Supply and Sales for Go Energies, LLC, provides an overview of factors that should be considered when predicting gasoline and diesel fuel costs for your fleet in the coming year.
Go Energies is blessed to have the opportunity to serve numerous municipalities with bulk fuel and fuel management services. With that responsibility comes the yearly request from some of these counties, cities, and towns to provide price per gallon estimates for fuel in the upcoming fiscal year.
While no one is able to definitively predict movements in fuel prices, we are able to provide our customers with valuable insights we have gained throughout recent months and years of experience in this industry. By considering some of the factors that contributed to rapidly changing fuel prices and supply shortages in 2012, we can attempt to paint a picture for 2013.
The most notable event of the previous year was Hurricane Sandy and the impact of the aftermath on fuel supply; however, this was only one of many forces at work. More specifically, 2012 saw the closing of a refinery in the Caribbean, a shortage of fuel and higher prices at the terminals receiving waterborne products, the annual switch to summer gasoline, cycles of a strengthening and then weakening US dollar, and ongoing tensions overseas.
With these factors in mind, 2013 will most likely demonstrate a similar pattern and therefore municipalities should be on the lookout for:
- Fuel supply allocation shortages;
- A market that many sources predict will see rising fuel prices; and
- Increased volatility leading to major swings in market prices over short periods of time.
Given the above predictions, the most critical skill to focus on in the upcoming years will be informed fuel purchasing. Based on fuel prices from 2012, we saw a move up or down $0.04 on 20% of the days in the year and a $0.02 move up or down occurred on 45-50% of the days.
As swings in this amount can save a municipality up to $300 per load it will be imperative that municipalities are armed with the proper tools necessary to make active purchasing decisions based on rapidly changing market conditions.