What Is It – Consigned Fuel

By Published On: December 7, 2022Categories: Daily Market News & Insights, What Is It Wednesday

When it comes to buying fuel, there are two primary ways you can pay for your fuel. You can buy in bulk, lowering costs but paying a larger bill upfront, or you can pay as fuel goes into a vehicle, incurring higher premiums for retail or mobile fueling. What if there was a way to get the best of both worlds? There is – with a consigned fuel program.


What Is a Consigned Fuel Program

With a consigned fuel program, a company is not charged for fuel until they pull it out of the bulk fuel tank. Let’s say you receive an 8,000-gallon gasoline delivery today but only dispense 250 gallons out to vehicles. With a consigned program, you’re only charged for 250 gallons today; the other gallons are not billed to you until you consume the fuel.

A consigned fuel program provides the convenience, supply security, and lower costs of a large bulk purchasing program but frees cash flow. Your company delays its payment until the fuel is dispensed. If your company already has fuel inventories in your bulk tanks, you could benefit from having that fuel “bought out” by your fuel supplier at the beginning of the program, providing an immediate cash payment.


When Does Consigned Fuel Make Sense?

There are several unique scenarios when a consigned fuel program makes sense. Let’s look at three specific examples:

Multiple Companies Sharing a Tank

In some low-space areas, such as car rental garages at airports or airline ground operations, there simply isn’t enough room for every different company to have their own fuel tank. In these areas, one company owns the fuel tank, and others “share” the fuel. With a consigned fuel program, the tank-owner is not responsible for the fuel in their tank – they pay for what they use, and the fuel supplier manages billing to other companies using the tank.


Multi-Agency Billing from a Shared Tank

When your company or government agency has multiple departments sharing a tank, it can be helpful to make sure that each entity is billed correctly. With a consigned fuel program, no one has to “front the bill” and get paid back later; each entity is only billed for what they purchase.


Freeing Up Cash Flow

Some companies don’t want to be in the fuel management business. Whether they’re hauling products, moving dirt, or crushing rocks, they want to avoid the complexity of managing their own fuel program. With a consigned program, your supplier manages the inventory and is responsible for keeping fuel available whenever you need it. You don’t own the fuel until you pump it into your trucks, reducing your inventory and freeing up capital. This could be a good talking point with your CFO or Treasury team to see if it makes sense for your business.


How to Get Started?

Reach out to a Consigned Fuel Export to find out if a consigned fuel program might be right for you.


Consigned Fuel Benefits - Bulk Economics, Free Up Cash Flow

This article is part of Daily Market News & Insights

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The information contained herein is derived from sources believed to be reliable; however, this information is not guaranteed as to its accuracy or completeness. Furthermore, no responsibility is assumed for use of this material and no express or implied warranties or guarantees are made. This material and any view or comment expressed herein are provided for informational purposes only and should not be construed in any way as an inducement or recommendation to buy or sell products, commodity futures or options contracts.

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