The importance of using real-time temperature correction factors

Understanding and managing every aspect of your fuel purchasing is critical in order to maintain or improve your margins. Tough negotiation and volume purchases are obviously core strategies in effective fuel buying, yet there is another strategy that can contribute to improving your fuel margins. To be truly effective, you must be aware of how volumetric fluctuations caused by product temperature can impact product volumes and pricing.

If you are not considering temperature variations, you are subjecting your company to great risk, particularly in states where suppliers buy in bulk based on temperature-corrected (net) volume but are required to sell and report to tax authorities based on the actual (gross) volume.

After decades of complicated formulas and imprecise approaches to calculate temperature corrections, modern technology now enables straight-forward access to the most objective, real-time temperature data available, right from the terminal.

Real-time information is critical to accurately account for temperature correction. When counter-parties are equipped with that data, they will be able to rely on solutions that aggregate the gross and net volumes at the terminal level. By doing this, outlier Bills of Lading (BOLs) can be filtered out, reports can run at set intervals throughout the day and you can rely on nearly real-time data that reflects all time zones and activities from the day.

Rating and reporting gallons precisely at the time of lifting means you have a more consistent and extremely reliable source for temperature-based volume adjustment factors and enables you to improve pricing processes and enhance your margins.

Whether you are a purchaser or supplier, confirm you are able to access and use consistent, accurate volumetric fuel measurements. Industry research indicates that many overlook this detail and that oversight has serious implications. Small errors in measurement, or no consideration at all for temperature correction, can result in unintended risk for both buyers and sellers.

Although there have been methods of temperature correction adopted over the decades, DTN offers a new model of Temperature Correction Index that improves the frequency, specificity, accuracy, and calculation of temperature adjustments. This innovation leverages real-time information from terminals and offer the most accurate data possible. To find out more about it, click here.