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[ARCHIVE] Rising Fuel Prices Getting You Down? [ARCHIVE] Rising Fuel Prices Getting You Down?
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This post is older than 1 year and may reflect outdated information.

Over the past couple of weeks the fuel market has been a hot topic of concern with clubs and our emergency road service providers and rightfully so.  The rising costs normally experienced with the approaching summer season multiplied by the unrest in Europe has shown a year over year price per gallon increase of more than 30%.  Being one of the top five expenses for fleets and providers, these increases are creating a tremendous concern.  The future of how much, how long, etc. remains unclear.

A number of years ago several clubs created a tiered fuel supplement program that is essentially a "set and forget" model to combat fuel market volatility (click here for examples).  In short, the tiers are broken out by the average fuel prices for the area and the supplement paid to the provider is triggered by reaching that tier.  The more widely adopted program is supplement per tow and/or enroute miles (i.e. provider submits 10 miles of tow, based on the tier of the average fuel prices in the area that provider would earn an additional $X.XX per mile).  The beauty of this model is it can truly be a set and forget unless the maximum tiers are reached, then simply extending the tiers with updated supplement payouts is needed.

These models help the provider offset the increase in prices and will float with the market volatility however, the program will need ample communication and reinforcement.  These programs may easily be forgotten when prices settle and rise again.

For D3 setup of fuel supplement automation, please click HERE.

Additionally, our PR team has provided us with the below talking points with regards to inquiries related to fuel prices:

  • AAA does not have top-end projections for gas prices. How high, or low, gas prices can go truly depends on the price of crude oil. Prices are expected to decline as they normally would after the summer, but if crude prices remain high, we can't say for sure and we don't want to provide any false projections.
  • The global supply chain, still trying to recover from the pandemic and a continued driver shortage, has been further impacted by the Russian invasion of Ukraine. This could likely add to surging costs, prolonged deliveries and other challenges for companies trying to move goods around the world. If gas prices continue to increase, this will likely play a role as well.
  • The announcement of a release from the reserves did not detail a specific timetable of when this will happen. The pricing impact from yesterday's announcement has been limited given that the amount of oil is small in comparison to the amount of oil that flows daily from Russia around the globe. The market will likely continue to increase the price of oil as more sanctions are imposed on Russia. A potential ban of crude imports from Russia to the U.S. or other countries will likely cause prices to continue to rise to reflect more risk of disruption to tight global oil supplies.
  • Historically, high gas prices do not deter people from traveling and as of right now, we expect spring and summer travel to be close or even exceed pre-pandemic volumes. During the holidays and winter, many people opted not to travel so there is a good amount of pent-up demand. To offset higher prices at the pump, people may opt for more budget-friendly options for lodging, dining and activities.

 

As always, feel free to reach out to your Regional Manager (Thomas Gwitt or Jody Smith)  with any questions/ concerns.

Jody Smith

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