Lock in price of Diesel?

Guys that buy fuel contracts do it because they can then better lock in their cost. Example would be say a dirt work contractor, if he bids a job in February to be completed in the summer. If he contracts his fuel price he will better know how to bid the job. If he bids it to cheap and fuel goes up 50 cents on a large job that could be a lot of money.

And yes you absolutely can buy a fuel contact with price protection, where if fuel goes down you will pay the lower price. You might pay a few cents more vs not having protection.

To many of you forget there's a whole nother world of trucking. It's not just OTR

 

at my age, i have forgotten more than you will ever know.

 

Schneider does. When fuel is "cheap" we buy a bunch and fill the ground tanks at our yards.

Say the ground tank holds 20,000 gallons. We will buy 100,000 gallons and take delivery over say 10 weeks. At the same time we direct trucks to fill at trucks stops. When fuel prices start going up, we start directing trucks to fill at the yard.

It's possible to do it, but possible and practical are two very differnt words. A very small company running the same routes every day or a very large company can make it work. For anybody else it would be more trouble than its worth.

 

that i believe is different from what the o/p asked. if i read it right, he wanted to know what companies buy at a cheaper price by contract? and fuel as they go?

where as your company does buy it cheaper, but stores it. for a later time.

i see that as 2 different scenarios.

 

Yep. Two entirely different things.

 

I get what you are saying, but it is not 2 different scenarios.

We buy X many thousands of gallons at a time, usually when we believe the price will be lowest. Those X gallons will get delivered over time, with the last truck loads being delivered months after the purchase. Long after fuel prices habe gone (hopefully) up, we are still paying the same price. It's just like we "buy" 200,000 tires from Goodyear at a time. We don't take delivery all at once, it will take 8 months or so and we pay on delivery, but we have already "bought" those tires. Anytime there is a long term contract like this the contract will stipulate both volume and price.

Last winter we had to add winter additives to our storage tanks at W. Memphis and Edwardsville because we bought too much summer blend.

 

oh, ok...one employer i was at decades ago, had a fuel tank in the back of the building, can't recall how many gallons it held. the boss back then shopped around at least one month in advance for a refill.