Do you know if you’re getting the right price for fuel? Have you compared your invoices to industry averages to know if it’s competitive? If not, it may be time to talk about Pricing Benchmarks– comparing your existing prices to a baseline to tell whether your rate is competitive. Fuel prices fluctuate constantly, so it’s essential to periodically benchmark them to ensure you’re getting the best possible price. One way to do this is by using fuel indexes — market indicators that track fuel prices and provide market insights for buyers.
By benchmarking prices, you can see how your buying stacks up against local averages. This information can help you to plan your fuel purchases strategically. Essentially, you’ll be comparing your previous prices to an index that reflects the market price of fuel, so you can evaluate it and ensure that you’re paying a competitive, reasonable price.
In this article, we’ll take a closer look at how to benchmark your prices using fuel indexes.
Step 1: Gather Your Fuel Data
The first step to Mastering Pricing Benchmarks is to get a grasp of your current fuel prices. If you have easy access to your fuel invoices, such as through an online portal, download a report or some sample invoices. You should be able to see the price of the fuel without taxes, freight, or fees – if not, ask your supplier to see if they can provide this information for invoices during a representative timeframe. Depending on your volume, it may only be feasible to pull a month or two of invoices, though longer timeframes will yield more accurate results.
Step 2: Choose the Fuel Index
With so many fuel indexes available, it’s important to choose one that best meets your needs. Among the most popular fuel indexes are OPIS, Platts, DTN, and Argus. The index can be based on a particular city (or “rack” market – OPIS and DTN offer this type of pricing) or for a region (such as Gulf Coast or New York Harbor – Platts, Argus, and OPIS each have these pricing feeds).
Consider factors such as the type of fuel you require, the location of your fuel purchases, and the frequency of your purchases. Once you’ve identified a suitable fuel index, you can start using it to benchmark fuel prices. Your fuel supplier can provide valuable insights in this step by evaluating your business and recommending the best approach to reach your goals. A common index for pricing benchmarks would be OPIS Gross Contract Average, which yields the average price paid for truckloads of fuel in a local market.
Step 3: Compare the Prices
Next, compare your historical invoice prices against the index. You may need to purchase a subscription to the indexing service to pull historical information. By lining up the price you paid each day with that day’s average price, you can see whether you bought above or below the average. Keep in mind how you’re receiving fuel – if you buy truckloads at a time, you should be close to the average. If you’re receiving less-than-truckload (LTL) deliveries, you’ll likely pay the average plus an adder, which is determined by your proximity to the fuel source, number of gallons received, and delivery frequency.
If you’re using pricing benchmarks to check multiple locations across a long period of time, this exercise can get unwieldy quickly. Mansfield can help you benchmark your fuel prices if you need help.
Step 4: Work with Your Supplier
Once you know how you stack up against the market, you can affirm whether your fuel buying approach is working. Non-contract spot fuel buyers find that they are happy with their existing purchasing method and the rates they are getting. If you’re not getting the results you want, speak to your fuel supplier about whether an index-based contract is right for you. With an index, your price is predictably tied to the market, so you always know where you stand.
If you are looking for a dependable fuel supplier, search no more. Mansfield Energy provides reliable fuel supply across North America at competitive, market-based prices, with a comprehensive range of options, including Cost Plus, OPIS, Cash Index, and Fixed Price, to cover all your fuel needs.