As reported by FreightWaves, fuel is the second-largest expense for trucking companies, and its cost volatility can significantly impact profitability. As profit margins in the trucking industry continue to tighten, the ability to efficiently manage and mitigate fuel costs has become a key differentiator between companies that thrive and those that struggle.
Today, we’re going to talk about the causes of fuel price volatility and explore various strategies that trucking companies can employ to navigate the waters of fuel price volatility, ensuring they remain competitive and profitable in a volatile market.
Understanding Fuel Price Volatility
Fuel price volatility is driven by complex global and local factors. Crude oil prices are heavily influenced by global supply and demand dynamics, geopolitical events and market speculation. Refining costs, distribution expenses and taxes also contribute to price fluctuations.
Additionally, supply disruptions due to natural disasters, conflicts, or refinery issues can lead to rapid price increases. The relatively inelastic nature of both oil supply and fuel demand in the short term means that small changes in either can result in significant price movements.
This volatility directly impacts trucking companies’ operations and profitability by disrupting cash flow and financial planning, forcing companies to adjust pricing strategies, potentially affecting competitiveness, and influence decisions on upgrades for the fleet.
So, what are trucking companies to do? While pricing can be uncontrollable, there are ways to get some control back. We have identified a handful of strategies many companies have adopted to manage fuel costs.
Optimize Routes and Reduce Empty Miles
Optimizing routes and reducing empty miles are crucial strategies for trucking companies to improve fuel efficiency and reduce costs. Advanced route planning software utilizes real-time traffic data, weather conditions and historical patterns to determine the most efficient routes, saving on fuel costs.
Additionally, by minimizing empty miles, or, when trucks travel without cargo, carriers can significantly reduce unnecessary fuel consumption. The American Transportation Research Institute recently reported that empty miles account for approximately 14.8% of total miles driven by trucks in the U.S.. With proactive planning, the industry could see this number reduce.
Lastly, we have seen some companies are exploring collaborative logistics, where multiple shippers share truck capacity to reduce overall empty miles across the industry. These optimization efforts not only lower fuel expenses but also contribute to reduced emissions and improved overall operational efficiency.
Conduct Regular Vehicle Maintenance
Regular vehicle maintenance plays a crucial role in managing fuel costs for trucking companies. Proper upkeep of fleet vehicles can significantly improve fuel efficiency and reduce overall expenses.
According to the U.S. Department of Energy, routine maintenance practices such as regular oil changes with the manufacturer’s recommended grade of motor oil in an engine can improve fuel economy by 1%-2%. Beyond that, things like properly inflated tires can improve your gas mileage by 0.6% on average, and up to 3%, which can lead to substantial fuel savings over time.
Regular maintenance not only optimizes fuel consumption but also extends vehicle lifespan, reduces downtime, and improves overall operational efficiency, making it a critical strategy for effective fuel cost management in the trucking industry.
Leverage Fuel Card Programs
Other common options for fuel savings include fuel card programs. RTS Financial offers a comprehensive fuel card program designed to help trucking companies save money and streamline their operations. Our fuel card provides discounts at over 3,000 fuel stations nationwide, including major truck stops like Pilot Flying J, Speedway, Circle K, Casey's, and more.
RTS offers three distinct fuel card options to cater to different business needs:
- The RTS Fleet One Fuel Card with discounts on fuel, maintenance, and truck care at locations nationwide.
- The RTS Self-Funded Fuel Card, available regardless of credit history, allowing fund loading via debit or credit card.
- The RTS Mixed Fleet Fuel Card, the all-in-one card for fleets of any size with both gasoline and diesel vehicles.
With average savings of 25¢ per gallon through the RTS Fuel Card Program, it’s easy to see that fuel cards are great options to get more gas for your gold. Members can also use our mobile app to find the lowest fuel prices along your route, which leads us to our final solution.
Implement Software Solutions
To implement the above strategies effectively, many fleets turn to comprehensive trucking software solutions like our own ProTransport and RTS Pro.
ProTransport offers a fully-configurable platform designed to maximize efficiencies and minimize costs across your operations. Its user-friendly interface integrates various aspects of trucking operations into one centralized system, allowing you to analyze your fleet's performance and make informed decisions for future growth.
RTS Pro provides features specifically tailored to help manage fuel costs. The software's integration capabilities with fuel cards and ELDs further enhance your ability to monitor and optimize fuel usage, among other great features.
By leveraging the capabilities of trucking software like ProTransport and RTS Pro, fleet managers can gain better visibility into their operations, make data-driven decisions, and ultimately navigate the challenges of fuel price volatility more effectively. These tools not only help in implementing the strategies we've discussed but also provide a comprehensive platform for managing all aspects of your trucking business, potentially saving on not only fuel expenses, but operating expenses as well.
While fuel cost management in a volatile market is challenging, it also presents opportunities for companies to differentiate themselves through efficiency and innovation. By implementing a comprehensive fuel management strategy, trucking companies can better navigate an unpredictable market, ensuring their long-term success and competitiveness.