The oil market remains focused on the Middle East and North Africa as U.S. oil prices surged above $100 a barrel last week, while prices in Europe hit a high of $120 a barrel.  These levels have not been seen since 2008.  In addition, a new survey from Oil Analyst Trilby Lundberg, released Sunday, says the average price of regular gasoline in the United States has jumped 33 cents per gallon in the last two weeks. The Lundberg Survey on fuel prices further indicates that this is the second biggest price increase on record since Hurricane Katrina came through in 2005 and increased prices by 38-cents-per-gallon.  The uncertainty surrounding the turmoil in the Middle East is likely to lead to even higher gas prices in the coming weeks.

So, what does this mean for businesses?  Companies with fleets of vehicles to manage are in a continuous battle to control costs while maintaining or improving service.  The recent and somewhat continuous increase in fuel costs is just one of the many challenges a company has to deal with that has a direct impact on the bottom line.  Many well-managed fleets have already taken important steps to reduce fuel costs, such as negotiating preferred rates, joining a fuel purchasing network, and specifying equipment designed for fuel economy. Each of these measures can potentially make a significant contribution to minimizing fuel costs.

Keeping in mind that fuel costs can be as high as 10 to 15% of total operating costs – and will continue to grow as prices of oil are driven upward - what else can companies do to further improve their margins? One key area, where improvements can be found is in fleet operations, through the practical application of technology – notably route optimization and planning, real-time vehicle tracking, and telematics . Such technology has been around for some time, but has historically been expensive and complicated to deploy. In addition, this technology can be instrumental in reducing mileage and driving efficiency conscience driver behavior without impacting customer service – and in many cases, improving it.  Want to hear more . . . let’s talk about a few examples.

. . . Route Optimization

By optimizing asset utilization and daily routes, thereby decreasing overall miles driven, your company can reduce fuel expenses and maintain or grow profit margins.  A variety of reporting tools will allow you to instantly monitor excessive idling, speeding and actual pathing of drivers’ routes.  You will be able to view current and historical data values for these pieces of information that will help to reduce, or eliminate these hidden costs.

. . . Yes, Speeding Burns More Fuel

It's a proven fact, driving at lower speeds saves gas.  Studies have shown up to a 14% savings in fuel consumption, when drivers reduce their speeds.  According to a CNN Money Report, "the biggest fuel saver is driving the speed limit and driving sensibly.  Rapid starts and stops and exceeding the speed limit will dent your pocketbook. Just by adhering to one of those, the Department of Energy estimates that drivers can save anywhere between 15 and 98 cents a gallon, assuming pump prices are at $2.97 a gallon."

. . . Do You Know How Many Hours Per Day Your Vehicles Are Idling? Let’s find that hidden cost of idling . . .

When a vehicle is left idling, it can consume one gallon of gas each hour.  The American Trucking Association states that one hour of idling per day for one year results in the equivalent of 64,000 miles in engine wear when adding up all the contributing factors.  The chart below shows Daily, Monthly & Annual Cost for Vehicle's Idling 1 hour per Day @ a fuel cost of $4.00 per gallon:

Vehicles Daily Idling Cost Monthly Idling Cost Annual Idling Cost
5 $20.00 $600.00 $7200.00
10 $40.00 $1200.00 $14,400.00
15 $60.00 $1800.00 $21,600.00
20 $80.00 $2400.00 $28,800.00
25 $100.00 $3000.00 $36,000.00

These numbers are for fuel consumption costs only, it does not account for the extra repairs and maintenance cost that arise from excessive idling. Our Bottom Line . . . As gas and fuel prices spiral upwards, reducing your fuel consumption and cost will have a positive impact on your bottom line.

Sources :

Gas prices being driven up by fear factor

Gas is $3.51 a gallon, how high will it go?

US Gas Prices?

Descartes White Paper: Reducing Fuel Cost: Four Things You Need to Know & Can Act on Today

Written by Sergio Torres

Vice President, Product Management for Descartes' Routing, Mobile and Telematics