Scroll Top

Fuel Supply Strategy

When margins get squeezed, every fraction of a cent counts. The hard truth in petroleum marketing is that most big marketers make fuel price deals with their suppliers. For high volume marketers without any success yet in negotiated pricing or small marketers only able to purchase at rack that may be a bitter pill to swallow. If your company is not yet negotiating supply prices, here’s a short primer.

Branded marketers often swear there is no negotiation on branded fuel. Suppliers actually want marketer customers thinking that way, but it’s simply not true. Yes, it’s easier to negotiate deals on unbranded fuel, but having the ability to move a lot of gallons in a short period of time or simply to be a large lifter daily often translates to price concessions on branded fuel as well. Here’s how to strengthen your fuel buying clout.

Get to know the fuel supply guy – Most marketers talk on a regular basis with local refiner sales reps. Unfortunately, most of these territory reps are on commission which means there is already large disincentive for them to even deal with you on price. So, save your breath and get to the fuel supply person. They are usually the only ones that can provide price concessions, not the rep.

Understand the supplier’s perspective – A refiner’s willingness to negotiate on price is controlled by complex and numerous factors. Proximity to pipelines, the refiner’s inventory, other deals that they’ve made, and excess supply, all factor into your fuel discount opportunities. It’s worthwhile to hop on a plane and visit with your supplier’s fuel guy just to understand the economics. You’d be amazed at what goes on behind the scenes, especially in trading and wet barrels.   Understand what the fuel guy needs. If you can help him solve his problems, he’ll help you with price.

Deal reasonably – Don’t expect long-term contracts with below market pricing. Instead, position your company to take advantage of spot bargains. Think of it this way – you want your company to be first on his call list when he needs to move gallons and is willing to do it cheaply! Without at least one million gallons per month, don’t expect to deal at all. For small marketers, you may need to co-op.

Be prepared for sudden volume – To take advantage of spot deals, you have to have places to put this fuel through either buyers lined up in advance or storage. Let the pricing and supply guy know exactly what you can and can’t do up front. You don’t want to be called with a sweet deal only to have to tell the guy you can’t take it.

Stay in touch – You can’t depend on the fuel guy to remember you, so stay in touch. Most marketers over 50 million gallons have someone who calls the pricing and supply guys daily just to check on opportunities. It also doesn’t hurt to invite them to your company if they happen to be in the area or get them out for a round of golf.

Don’t get discouraged – Many marketers find they have to knock on the door pretty persistently before something happens. With mergers and refinery swaps changing the fuel landscape virtually daily, what may be a closed door today could become wide open tomorrow. Keep knocking. Every fraction of a cent does count.

Leave a comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.