Portland: choosing the right fuel procurement strategy
Portland Fuel has offered its perspective on how fleet operators can select the right fuel procurement strategy, which it highlights as key to maintaining profitability, managing exposure to fluctuations in the market and ensuring operational efficiency.
“It is important to understand all your options, so that you can weigh up what is right for your business and make informed decisions that align with both your operational goals and risk appetite,” said Portland.
“Bulk delivery is often the simplest and most cost-effective way for an end user to purchase fuel, particularly for larger fuel buyers who can offset the costs of fuel tank installation and maintenance with the cost savings of purchasing larger fuel volumes.
“In terms of supply agreements, there are usually two different frameworks in which the end user can purchase bulk fuel: on a spot basis or within a contract agreement.”
With a contracted fuel supply, says Portland, a supplier agrees to provide a specified volume of fuel over a fixed period, typically 12 to 24 months.
“This is usually priced at a fixed premium above the published wholesale price and is a way of ensuring security of supply for the buyer, whilst also ensuring that the margin applied by the supplier does not vary with changes to the fuel price.
“Alternatively, Portland Fuel offer bulk fuel at a fixed price, allowing buyers to secure a guaranteed price for a period of 3 to 18 months. By fixing a fuel price, rather than just the premium, fuel buyers can benefit from greater budgetary certainty and protect themselves against the volatility of the fuel market. Overall, this helps buyers to better manage profit margins and gives a significant market advantage.”
Purchasing on the spot market means buying fuel ad-hoc as required, it explains, with no obligation to use any one supplier.
“This gives buyers the power to award supply to the most competitive bidder. The prices provided are based on the live market at the time of purchase which means they can change minute-by-minute, providing the buyer the chance to react to changing market conditions.
“At Portland Fuel we understand the benefits of spot purchasing, therefore we provide spot quotes alongside our fixed price offering. A lot of our fixed priced customers fix a percentage of their overall fuel consumption whilst allowing the rest of the volume to be purchased on the spot market. This helps to provide budget certainty, whilst also ensuring buyers can reap the benefits of spot purchasing.”
Fuel cards are another simple method for an end user to purchase fuel, the firm says, as fuel card providers handle the procurement of physical product, enabling the end user to simply fill up vehicles at a site within the network and receive a weekly invoice for fuel purchases. Portland Fuel offers a fixed price via fuel card, with no fees and very low volume requirements, and says its fuel cards are accepted at the UK’s top card networks.
“Similar to the fixed price for bulk fuel supply, it means the buyer has complete certainty over fuel costs, so they can budget with confidence and stay ahead of the competition. Whilst locking in a price is a great way for a business to better manage their fuel costs, we understand that it isn’t necessarily the best option for all businesses, therefore we are also able to send out our competitive weekly rate to buyers who would prefer not to lock in a price.”
The company also highlights bunkering as an option.
“Rather than arrange for a physical fuel delivery, bunkering enables the end user to purchase stock from a bunker stock supplier via transfer into a virtual stock account usually on a fixed premium basis. This volume is then drawn down via fuel cards which are distributed to drivers within the end user’s fleet. Similar to bulk supply, bunker stock can be purchased on a spot or contracted basis. There are two major bunker network operators in the UK: Keyfuels and UK Fuels.
“Portland Fuel can offer a fixed price for 3 to 18 months ahead on both the UK Fuels and Keyfuels networks. This involves us transferring the fuel into the buyer’s network account at a fixed price, whilst they use their existing cards as normal. As with both bulk fuel supply and fuel cards, there is the option to also take advantage of our variable price options.”
The firm added: “When considering the available options and reviewing your approach to fuel procurement, it is important to evaluate factors such as your business’s risk appetite, cash flow and credit, and site storage. By taking the time to properly assess these factors, you can ensure that your business operates as efficiently as possible while avoiding unnecessary additional costs.”
