ProMiles Fuel Optimization

What is Fuel Optimization and how does it work?

Fuel prices are running neck and neck with driver pay as the number one expense for the trucking industry. When implementing a fuel optimization program, it is important to consider the usage of the program from several angles. First and foremost is of course, will it save you money? By definition, you would think that it would have to be so, but restrictions placed on the user by software programs can cause inaccurate or ineffective results that can have a negative impact on your fuel purchase budget.

For any fuel optimization application, the goal is to save money by analyzing the amount of fuel in a tank at any given point along a route, the price of fuel along the route and the best places to purchase fuel based on these parameters. This can sometimes mean purchasing a minimum amount of fuel at one stop in order to have enough fuel available to make it to a better stop further along the route.

Another primary consideration when using a fuel optimization program is determining how difficult it will be to get started; and how soon you will see a return on your investment. An important factor at this point should be, how difficult it will be to convince the driver to use the results of the fuel optimization plan in making the actual fuel purchases.

The accuracy of any fuel optimization program is also based on how current the pricing is and how many prices are available. We recommend that prices be updated at least daily and have an average of over 4,000 prices each day.

Driver shortages throughout the industry have reduced the ability of a carrier to force a driver to conform to their wishes without considerations being given for the convenience of the driver. Convenience to a driver often means simply being able to stop at one location and being able to purchase fuel, take a shower and get something to eat. Thankfully, software applications such as those developed by ProMiles Software Development Corporation are responsive to those needs.

When optimizing fuel purchases, it is also important to make a distinction between retail price and the ex-tax price.

Retail Pricing/Cash Price

Retail price is simply the price posted on/at the pump and normally on a sign below the Truck stop name near the entrance. Of course, the majority of truck lines have a discount off the pump "cash price" or have a "cost-plus" deal negotiated with a truck stop or chain.

Ex-tax pricing on the other hand can be more interesting.

Most drivers look at the price shown on the pump without taking into consideration the amount of refundable/creditable fuel tax included in that price. At the end of a quarter, the numbers become more interesting. The fuel that seemed cheap during the quarter can end up costing a fortune when filing IFTA reports.

The short answer here is that you should always compare apples with apples. Because the IFTA tax rate can vary widely from state to state (example; 1st quarter 2003 rates at the pump vary from  $0.00 to $0.315 per gallon), it is always best to compare fuel prices not including any refundable/creditable fuel taxes.

Consider this situation:

An owner/operator makes a regular run from Miami to Nashville twice each week. At the end of a quarter, he has a total of 4,082 miles in Florida, 9,646 in Georgia and 3,432 in Tennessee and purchased 3,000 gallons of fuel.

For this example, we will say that all fuel in Florida has a retail price of $1.65, all fuel in Georgia has a price of $1.55 and all fuel in Tennessee is $1.60

At first glance, the decision is easy; Georgia has the cheapest retail price on fuel.

So that means that he/she saved $300 over purchasing all of the fuel in Florida (3,000 gallons x $0.10 per gallon cheaper), and $150 over purchasing fuel in Tennessee (3,000 gallons x $0.05 per gallon).

However, if all 3,000 gallons were purchased in Georgia, at the end of the quarter he/she would owe about $160* in fuel taxes when filing his/her IFTA report.

Of course if all of the fuel had been purchased in Florida, he/she would have a credit at the end of the quarter of about $365* when filing the IFTA report.

Rather than attempting to calculate all of this on a continuous basis as fuel prices change, it is much easier to look at the actual price(net price) of fuel not including these refundable/creditable amounts (apples and apples).

  Florida Georgia Tennessee
Retail price $1.65 $1.55 $1.60
Minus Refundable/Creditable Amount $0.2877 $0.1189 $0.17
Net price (ex-tax price) $1.3623 $1.4311 $1.43

So now we see that in this example, the actual cost of fuel is cheapest in Florida.

* Based on 1st quarter 2003 IFTA tax rates


What else can ProMiles do for your Fuel Optimization needs? Click here!


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