At the time of this editorial (July 15), the Energy Department was quoted on the newswire as saying, “The average nationwide price of gasoline jumped 10 cents in one week to $2.33 a gallon — a new record that surpasses the April 2005 peak by a nickel.”
Pump prices are the highest on the West Coast, averaging $2.48 a gallon, and cheapest in the Gulf Coast, where motorists pay on average $2.24 a gallon, the agency said. In the Midwest, gas averages $2.32 per gallon, and on the East Coast, $2.31 per gallon.
When gas prices peaked in mid-April and supplies began to build, forecasters expected prices to gradually ease through the rest of summer. Gas prices began falling as the price of crude oil fell to $47 by mid-May. Since then, a spike in crude prices above $60 a barrel has sent gasoline prices surging along with them. The price of crude contributes to about half the cost of a gallon of gasoline.
For all of us in the chauffeured transportation industry, in order to find ways to beat the rising cost of business via fuel economy, we must first understand our true gasoline costs and then work toward curbing them.
You may not know that the EPA ratings for 2005 sedans are 18 mpg for the city and 25 mpg on the highway. However, due to idling, the average falls to about 14 mpg. A six-pack limousine averages 10 mpg while a stretched SUV gets around 8 mpg.
Here’s a quick way to calculate your per-vehicle fuel averages (below fleet mileage stats can be found on page 36 of the 2004/2005 LCT Fact Book): Sedans: 49,459 miles per year divided by 14 mpg x $2.33 per gallon (national average as stated above) = $8,232 cost of fuel per sedan per year. Six-packs: 28,963 miles per year divided by 10 mpg x $2.33 per gallon (national average as stated above) = $6,749 cost of fuel per limousine per year. Stretched SUVs: 20,214 miles per year divided by 8 mpg x $2.33 per gallon (national average as stated above) = $5,888 cost of fuel per SUV per year.
Now that you have a truer picture of today’s fuel economy, you can see why it’s worth it to combat these rising costs. First, if you are not already doing so, it’s time to add a fuel surcharge. Your clients will understand and accept this. Recently I spoke with Jim Luff at Limousine Scene in Bakersfield, Calif., and he told me after years of holding out for fear of client rejection, he instituted surcharges this year. And not one single complaint yet. On fuel surcharges, it seems that the percentages are all over the page but most are around 5%-6% of the trip. Another tip offered by Rob Hansen of Bayview Limousine in Seattle was to shop for discounted fuel. He is in negotiations with Costco but has had a long-standing relationship with one gas station that gives him 5 cents per gallon off the retail price. Rob says that the best bet is to negotiate with privately owned stations.
On this note, think about a group purchase program with your local association to get the fuel volume up higher. Stations will pass their volume discounts along so the more the merrier. Fuel cards offer a good tracking method. Some offer discounts but another benefit to using a fuel card system is for tracking gasoline consumption. You will find out very quickly who the lead foot and idler are on your team. As a matter of fact, the Ford Fleet, Limousine & Livery department published a statistic this past spring on idling costs. Did you know that one hour of idle time equals 33 miles on your limousine? Wow! It is well worth it to work with your chauffeurs on this issue. A penny saved is a penny in your pocket and it all adds up.
Sincerely, Sara McLean