Operators Explore Gas Price Strategies

Posted on October 30, 2003 by LCT Staff - Also by this author - About the author

Operators around the country are dealing with the uncertainties in cost of fuel in a variety of ways, from adding fuel surcharges to clients’ bills and using fuel card accounts, to fuelling up in nearby less-expensive states. One even went as far as purchasing a gas station.

“I decided to be my own best customer,” said Robert Alexander, president of RMA Chauffeured Transportation, a 50-plus-vehicle operation in Rockville, Md. He bought a gas station nearly two years ago, and said he intends to keep it as long as it remains profitable.

A more common approach, however, was for operators to transfer part of the additional gas price onto clients’ invoices in the form of a fuel surcharge.

A random polling of operators by LCT earlier this year showed that some operators were charging a flat fee while most were opting for a percentage-based surcharge that fluctuated with gas prices.

Among these operators is Richard Kane, president of International Limousine Service in Washington, D.C. He recently told LCT his average surcharge in 2003 was 5%, including gratuity, which he charged against gross revenue.

He said he readjusts that number throughout the year, based on information from a Web site that lists gas price trends by region of the country http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp.

But Kane wipes the slate clean at the beginning of each year, reformulating his rates every January and removing the surcharge. “We then initiate a surcharge [again] only after a three- month trend of higher prices,” he says. “We don’t adjust it every time it jumps up or down.”

Another approach is to use fuel-card accounts.

“We’ve been on fuel cards for a number of years. We go to a fuel facility that’s not open to the public; you have to have an account there,” said Steve Cunningham, president of Carey Phoenix and Las Vegas-based Fox Limousines. “We’re not paying any better rates – to be honest with you, it might actually be a couple of cents higher – it’s mainly for the convenience of having a system.”

He explained that since the fuel facility has cameras and requires the chauffeurs to punch in a PIN code that’s traceable only to them, the system indirectly has saved Cunningham money by eliminating employees submitting gas receipts for personal vehicles.

Likewise, some gas stations offer a special rate for commercial clients. Exxon Mobil, for one, offers a fleet card that features a rebate of up to 3.5% off monthly purchases along with customized security features and detailed purchase activity reports.

Some operators, often based in border-state areas, also fuel up in the state that has the lowest price – and in certain areas that can save a lot of money.

In the Chicago area, for example, in October, gasoline in Illinois was 40 cents a gallon more expensive than in nearby Indiana.

-- Rebecca Christiansen & Neil Weiss

Price of Gas Crawls Down

The U.S. average retail price for gas at the pumps decreased slightly for several weeks in a row last month and was expected to keep crawling – however slowly – downwards. Softening demand, coupled with greater supply, led to this price drop, the Energy Information Administration reported in October.

The U.S. average retail price for regular gasoline was $1.59 per gallon, 17.8 cents higher than one year ago but still lower than the spike in prices experienced in the summer.

Get More Mileage For Your Money

IRVINE, Calif. — Gasoline prices are a major expense for any limousine operator. But there are some ways to cut costs. Kelley Blue Book, Enjoythedrive.com and Response Insurance offer these money-saving tips:

• Gasoline is densest when it is cold and drivers are charged based on volume. Buying gas during the coolest time of day, usually first thing in the morning, yields more gas per gallon, thus leaving you with more gas for your money.

• New spark plugs and wires can make a difference in gasoline mileage. An upgrade to high-performance spark plugs and low-resistance plug wires can improve fuel economy and performance, as well as reduce emissions.

• Four tanks of gasoline with "Techron" can clean your fuel injectors as well as most professional-grade cleaners. Clean injectors will help your vehicle get up to 5% better gas mileage.

• Check the air filter and tire pressure. A clogged or dirty air filter can slow down the car and use more gasoline. A clean filter will promote less gas waste. Under- inflated tires could also cause excessive drag, slowing down the car and using more gas.

• Accelerate normally from a fully-stopped position. Avoid flooring or stabbing the gas pedal since that action pushes more fuel to the engine than is needed to move forward and wastes gas.

• Don’t idle for more than two minutes. When the car isn’t moving and the engine’s running, you’re getting 0 mpg.

• Lighten the car’s load by taking unnecessary items from the trunk. Every 200 pounds of weight reduces gas efficiency by one mile per gallon.

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