Factors to Consider When Evaluating Wholesale Fuel Prices
Purchasing fuel in the wholesale market is not an easy job. The logistics for shipment and delivery require excellent organization. There are also hundreds of potential partners to choose from.
The complexity of purchasing in the fuels market has increased over time. Savvy fuel buyers know that monitoring multiple data points enables profitable purchases.
DTN Refined Fuels Demand makes the job of fuel buyers considerably easier. With a comprehensive and geo-specific data feed at your fingertips, you are better equipped to monitor the delicate balance between supply and demand. This unprecedented view from above the entire marketplace provides the operational intelligence you need to make purchasing decisions confidently.
Successful fuel buyers must remain vigilant and ready to pounce on opportunities that present themselves. What exactly do fuel buyers need to consider when evaluating wholesale fuel prices? And how can you make sure your rack pricing data measures up to your needs?
3 essential factors in wholesale fuel prices
Let’s look at three essential considerations: price, temperature, and transport.
Understanding that fluctuations in retail price have an immediate impact on both supply and demand (coupled with intelligent buying at wholesale prices) can help cement your company’s prosperity. But the question is, what kind of price information do you need?
Year-over-year data is an important tool that can help you better understand the seasonality of fuel price changes throughout the year. However, year-over-year data on its own does not present a reliable picture. After all, look at how drastically the markets were –affected—and continue to –be—due to the COVID-19 pandemic.
“Nearby” data, such as daily city- and PADD-level demand data, can help you hone your rack pricing data and more effectively monitor the fuel pricing relevant to your operations.
Details matter. Sometimes, even a seemingly insignificant detail can impact your prosperity. For example, temperature is often overlooked when looking at wholesale fuel prices. When measuring the volume of one gallon of gas, a base temperature of 60 degrees Fahrenheit is used.
But what happens if the fuel you purchase is warmer or colder than that base temperature? The cooler the gas is, the more it condenses, meaning that as it returns to the base temperature of 60 degrees, it will expand. That means that for every individual gallon of gas sold below 60 degrees F, there is more than one gallon of volume.
The inverse is also true for gas that is warmer than 60 degrees. As the temperature increases, the gas molecules expand, taking more space. In this scenario, as the gas returns to the base temperature of 60 degrees, it will contract, leaving less volume than what was initially purchased.
When dealing with large contracts of wholesale fuel, even a slight discrepancy in fuel temperature can have a significant impact on your profitability over time. With cutting-edge tools that measure actual fuel temperature (not an estimate based on atmospheric conditions), you can have confidence in the volume of the fuel you’re buying.
Shipping and transportation costs play a huge role in evaluating wholesale fuel prices. Who of us hasn’t found a great-priced item on Amazon, only to realize that the shipping fees ended up making the item way more expensive than the purchase price suggested? The same can be true with wholesale fuel; only the costs quickly increase over larger volumes.
The distance purchased fuel needs to travel contributes to transport costs and delivery times. For example, if you buy fuel from a rack at a remote location, how long will it take to get to you?
Evaluating these factors related to delivery times and costs is essential to avoid the problem of empty tanks during high demand. Conversely, ending up with more fuel than you can profitably move is also a risk.
Is your rack pricing data adequate?
How does your current rack pricing data measure up to your business needs?
For rack pricing data to be practical, it must be:
- Accurate. Having inaccurate data is akin to having no data. During manual data collection or input, one simple mistake can undo much hard work. Automatically collected pricing data ensures your information is accurate – removing bias and human error that could mislead you. This includes actionable insights on outliers, removing them from report averages so inaccuracies do not skew the data.
- Timely. Your team can only make informed decisions if comprehensive data is available at the right time. Your data should be ready when you are, logging intra-day price moves and complete reports before your contract effective times, giving your organization time to act before an opportunity slips away.
- Clean. Your data must be ready to be used immediately. It should show you information relevant to your operations, packaged in an actionable and usable way. Don’t waste precious time sifting through unfocused data presented to you – your pricing system should do it for you!
- Integrated. Businesses often shy away from adding complexity in the form of another platform or database. Likely there are already several systems in place for your business. Even the best insights are inconvenient if not integrated with your current systems.
Bring your rack pricing data to the next level with DTN Refined Fuels Demand.
Your wholesale purchasing team needs a tool that has been customized specifically to your business needs and goals. DTN Refined Fuels Demand enables your enterprise to craft actionable strategies based on demand volumes measured by the grade, including distillate grades. This independent, trusted source will empower your team with the data they need.
The kind of operational intelligence you need must reflect overall market demand and volume, not just internal data from your existing inventory and accounting systems. This comprehensive data is made possible by capturing nearly 85% of all US downstream petroleum transactions, eliminating sampling bias and manual errors to ensure accurate data.
Still not convinced DTN Refined Fuels Demand is right for you? Try it out today and see how it revolutionizes your fuel buying strategy.