Take Advantage of Fuel Price Plunge… Before It Comes Back Up

Posted on December 2, 2008 by LCT Staff - Also by this author

This is the second in an ongoing series of my publisher’s pages devoted to helping you find new markets and tough out economic storms. Whenever the economy turns down, there are always some silver linings that can help your business think, plan, and move in new ways.

After a year of record high fuel costs, we are seeing the price per barrel of oil plunge back to saner levels. As I write this, the price per barrel of oil has slipped below $60, with many areas of the U.S. seeing gas prices below $2 per gallon. That’s a relief compared to the $147 per barrel peak in July. Not even OPEC production cuts seem to be staving off price declines as Americans drive and spend less.

As operators, each of you must decide in your respective markets whether, or by how much, to reduce your fuel surcharges. In an economy where everyone is cutting costs and tightening belts, a reduced or eliminated fuel surcharge can send a marketing signal that your company wants to price its services in line with consumer expectations. Remember, many consumers cynically observe how fast gas prices rise, yet how slow they fall. Would they view your fuel surcharges the same way? Do you gain a competitive advantage if you reduce or cut fuel surcharges?

This also may be a good time to arrange future fuel contracts. Securing future bulk fuel purchases at lower prices can certainly hedge against the next time fuel prices climb. And we all know they will.

Outside of fuel surcharges, declining gas costs have granted this industry a temporary reprieve amid a difficult economy. This can be a great opportunity for you to recharge financially and strategically. If your fuel costs are down by $2 per gallon, then that could free up some funds for other areas of your operations.

Take marketing, for example. What you save in fuel could be redirected toward raising your profile and getting your message out. Marketing is more of a must than ever during a downturn. So fuel your marketing budget.

This lull in gas costs, however temporary, may also provide a “quiet time” to re-evaluate your fleet mix. One lesson we’ve all learned from 2008’s hyper gas inflation is to never be caught off guard again – whether factoring in your overall energy costs, fleet vehicles, or client base. This may be a good time to explore the greener vehicle options being rolled out by many of our industry’s leading coachbuilders and automakers.

As consumers look for more affordable transportation, group-oriented vehicles such as buses and vans, likely will gain market share. Is this the time for you company to consider hybrid buses and SUVs? Clean diesel sedans? Shuttle buses and vans?

And while we are on the subjects of green and energy, these economic sectors will offer much business potential for chauffeured operators in coming years. The fuel fiasco this year has made countless business owners and consumers realize that our economy and transportation networks can never rely again on just oil and gas alone. Companies that explore and tap new energy sources and related technologies will thrive. Their employees and managers will need to travel to make money and gain market share. And we can’t write off traditional energy companies, either.

Politicians may be allowing more oil and gas exploration in the short-term, and the companies pursuing such activity will need transportation as well. While the economy presents unique challenges, the world of energy has given you several silver linings: Lower fuel costs, more savings, and growing future market opportunities. We’ll all just keep looking up, ahead, and around.

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