5 Fuel Contract Mistakes That Cost Companies Millions

For companies that purchase millions of gallons of fuel each year, small contract details can quickly add up to large expenses. Even a few cents per gallon can seem minor during negotiations, but across 20 million gallons, a five-cent difference adds up to $1 million in annual fuel spend.

A fuel contract should be evaluated as more than a negotiated price per gallon. The pricing benchmark, freight structure, volume requirements, supply provisions and renewal terms can all influence what a company ultimately pays and how well the agreement performs when market conditions change.

The challenge is that some of the most expensive mistakes are not obvious when the contract is signed. They often become apparent months later, when invoices begin arriving, fuel demand changes, or the market experiences a disruption.

Here are five mistakes companies should watch for when evaluating their next fuel agreement.

1. Focusing Only on Price

One of the easiest and most common mistakes is comparing suppliers based primarily on the quoted fuel price or differential.

That number matters, but it may represent only part of the final cost. Consider a simplified example. Supplier A may offer fuel at an attractive rack-plus price but charge separately for freight, split deliveries, minimum drops, or other services. Supplier B may quote a slightly higher fuel margin but provide better freight economics for the customers’ locations. Looking only at the commodity portion of the bid could produce the wrong conclusion.

Companies should look closely at the pricing benchmark and terminal being used, the supplier margin or differential, how freight is calculated, applicable taxes and fees, minimum delivery quantities, emergency or after-hours charges, and any potential accessorial fees.

This becomes especially important for companies operating across multiple states or markets. Two facilities buying the same product may have very different economics depending on terminal access, transportation distance, and local supply conditions.

 

2. Choosing the Wrong Pricing Structure

There is no single fuel pricing strategy that works for every business.

Some companies prioritize obtaining a competitive market price. Others need predictable budgets. Some want to reduce exposure to steep price increases, while others are comfortable accepting market volatility in exchange for participating when prices decline.

The problem arises when the contract structure does not align with the company’s actual objective.

Many wholesale fuel agreements use independent benchmarks. OPIS, for example, publishes gasoline and diesel rack benchmarks that are widely used as pricing references in wholesale fuel transactions and supply contracts. Its data covers hundreds of U.S. terminal locations, providing buyers with an independent market reference for evaluating contract pricing and reconciling supplier invoices.

But even an index-based agreement requires careful definition. Which rack applies? Which OPIS benchmark is being used? Is pricing based on an average, low, contract average, or another published value? At what time of day is the benchmark captured?

Those distinctions matter because rack prices can change throughout the day. OPIS, for example, publishes different benchmark snapshots, including a Contract Average around 10 a.m. Eastern and a Closing Average later in the day.

For a commercial fuel buyer, the lesson is not that one structure is always better than another. The structure should support the company’s financial goals.

 

3. Locking in the Wrong Volume

Fuel contracts frequently begin with a forecast. How many gallons will the company consume next year? Which locations will need fuel? How frequently will each site require deliveries?

Those forecasts matter because suppliers use expected volumes when planning transportation, inventory, and pricing. The risk comes when a company treats the forecast as if its operations cannot change.

Fuel demand can move for many reasons. A customer can gain or lose business. A fleet may become more efficient. Facilities may open or close. Equipment utilization can change. Acquisitions, divestitures, and operational changes can shift gallons between locations.

 

Even nationwide demand patterns change over time.

Before agreeing to minimum purchase commitments, buyers should understand what happens if actual consumption differs from projections.

Let’s say a company expects to purchase 15 million gallons over the life of an agreement but later closes several operating locations. If the contract requires a minimum volume or contains a shortfall provision, the company may still have financial obligations tied to gallons it no longer needs.

The opposite situation matters too. Rapid growth could push consumption beyond contracted volumes and require additional supply under different pricing or transportation arrangements.

A good contract needs sufficient structure for suppliers to plan effectively while providing the buyer with reasonable flexibility as operations change.

 

4. Ignoring Supply Reliability

During normal market conditions, a penny or two per gallon can dominate a procurement discussion. When supply is disrupted, the conversation changes very quickly.

A fuel contract should address more than how fuel will be priced. It should also establish how supply will be managed when the normal distribution system is under pressure.

This matters because the fuel market depends on a complex physical network. Product must move from refineries through pipelines, terminals, and trucks before reaching customer tanks. When part of that network becomes constrained, location matters.

That makes questions about terminal access, transportation capacity, and alternate supply much more than operational details.

Imagine two contracts with nearly identical everyday pricing. One supplier depends primarily on a single terminal for a customer’s market. Another has arrangements that allow access to multiple terminals or alternate supply points.

On an ordinary Tuesday, the difference may be invisible. During a terminal outage, severe weather event, or regional shortage, it could determine whether the customer receives fuel on schedule.

Price still matters. But the cheapest gallon on paper provides little value if it cannot reach the equipment that needs it.

 

5. Failing to Review the Contract

Fuel contracts should not be reviewed only when they are about to expire.

Markets change. Operations change. Freight changes. Taxes change. Consumption changes.

The pricing environment itself can also move substantially because crude oil represents only one component of a delivered gallon. According to EIA, crude oil accounted for approximately 51% of the average U.S. retail on-highway diesel price from 2004 through 2025. The rest reflected refining, distribution, marketing, taxes, and other costs.

Taxes alone are significant. According to EIA, the federal tax on on-highway diesel is 24.4 cents per gallon. As of January 2026, state diesel taxes and fees averaged another 35.50 cents per gallon, before considering potential local taxes.

That complexity makes periodic contract reviews valuable. Companies should regularly compare invoices against the agreed benchmark, differential, and freight structure. Small discrepancies become meaningful when multiplied by large volumes.

 

A Better Fuel Contract Goes Beyond Price

A strong agreement clearly defines how fuel is priced, how it will be delivered, what happens when demand changes, and how both parties will respond when the market does not operate normally.

Companies can reduce these risks by working with a fuel partner that combines procurement expertise, broad access to supply, and logistics support.

Mansfield can help customers evaluate total delivered cost, select a pricing structure that aligns with their goals, plan for realistic volume needs, strengthen supply reliability, and review contract performance over time. With access to more than 300 refinery contracts nationwide with more than 900 fuel terminal supply points, along with price protection analysis based on buying history, fuel cost, and organizational goals, customers can make more informed decisions before small contract issues become expensive ones.

Before your next contract renewal or fuel bid, take the time to review what is really driving your cost and risk. Talk with a Mansfield representative to evaluate your current fuel strategy, identify potential gaps and build an approach that better supports your budget, operations and supply needs.