Traditionally, fuel prices tend to trend lower in the winter. This makes the timeframe from December to February a great time to talk to customers about fuel contracting. The company offers both fixed price contracts and maximum price contracts for up to 12 months into the future. Tim Danze, senior pricing analyst, suggests asking customers about their anticipated fuel needs for the upcoming year to get the ball rolling.
“We want to help our customers lock in pricing protection, and the best way to do that is through contracting,” Danze says. “But, you can’t just wake up one day and decide its’s time to start working on fuel contracts. You need to stay engaged and keep an eye on the market so that you know when favorable opportunities present themselves.”
Danze recommends talking to customers about the number of gallons they will need, when they will need the fuel, and the pricing they need to stay profitable.
“The goal is to lock in a price on a percentage of your customers’ projected fuel needs,” Danze says. “It’s hard to time the market perfectly, but we can set up contracts for customers with pricing that fits their budget and offers potential cost savings.”
Currently, Danze views the fuel market as overvalued. He notes prices haven’t been this high since June 2015, and it wasn’t too long after that point that the market saw a strong sell off which drove prices to 10-year lows.
“This might be a good year for your customers to consider signing a maximum price contract on some of their gallons, because they would still be able to access lower pricing if the market drops,” Danze says. “Max price contracts have a reasonable cents-per-gallon fee that provides customers with peace of mind that if the market does move lower, they will be protected.”
Though it’s impossible to predict where prices will go, Danze says it’s likely a buying opportunity will develop in the next few months.
“The most important thing is to work with customers to understand their break-even levels and look at how potential contract prices compare to their budget,” Danze says. “If you can lock up a price at or below their budget, that should make the decision fairly simple.”