Managing escalating fuel costs

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fuel gauge.jpgWhile the fuel price may have dropped by 11c last night, a future of higher fuel prices means organisations must proactively control their fleet finances.

Fuel has always been a significant factor in an overall fleet bill, but the fuel price hikes since late 2008 mean that fuel costs around 25% more than the 20-year average adjusted to today’s prices.

Although fuel efficiency is improving, and vehicle manufacturers are tasking themselves to reduce their vehicle fleet carbon emissions to as low as 80 grams per kilometre (which equates to a fuel consumption figure of about 3l/100kms), the rate of improvement is not keeping pace with fuel prices.

Add a possible Rand currency strength depreciation to the equation and South Africa’s fuel price will accelerate further ahead of vehicle fuel economy improvements.

Therefore, to manage the threat of structurally high fossil fuel prices organisations need to take a proactive approach to controlling fleet costs and cannot rely on market forces.

Fleet management is all about understanding the interplay between the drivers of fleet costs: vehicle choices, journey decisions, driving skills, taxation and the price of fuel itself.

Applying appropriate strategies to each of these will make a difference.

To control your fuel cost you must first be able to measure it – use petrol cards to buy as much of your fuel as possible. That way you will know how much you paid and how much you used.

Truck driving.jpegBad driving habits may burn 20% more fuel, and add extra wear and tear on a fleet. Training in efficient techniques improves consumption by up to 15%, giving a quick return on training costs.

Efficiency training is a necessary investment for drivers who have little choice over distances and routes. Plus, the efficient techniques usually translate into safer driving.

Mileage is the underlying driver of fleet costs. It determines fuel use, how often vehicles must be serviced and the life expectancy of a vehicle. It is therefore important to log and analyse journeys.

Capturing mileage data requires drivers to record the length and purpose of every journey, deterring exaggerated claims and unproductive driving. Furthermore, vehicle telematics uses ‘black box’ technology to record and transmit to fleet operators information on fuel use, acceleration, braking and vehicle location. The initial saving on fuel and mileage costs from implementing mileage capture can be as high as 25%.

Considering the vehicle carbon emissions tax applied to new vehicle sales since September 2010, choosing low CO2 vehicles will save on fuel and tax.

Perform total cost of ownership calculations (also known as whole-life costing), which take into account, among others, fuel efficiency, depreciation and insurance premiums to predict the overall operating costs of the vehicle during its life. Choosing vehicles based on total cost of ownership could have the large impact on fleet running costs.

Remember, fleet vehicle purchase decisions will commit you to certain costs for the next 48 to 60 months…

Some of the information in this article was taken from Supply Management, November 2011.

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