Is Your Fuel Purchasing Strategy Delivering Results for Your Business

Is your fuel purchasing strategy working as hard as your fleet? Many organizations spend years refining delivery routes, improving vehicle efficiency, monitoring driver performance, and controlling maintenance expenses. However, they may not apply the same level of attention to the way they purchase fuel. A strategy that worked well several years ago may no longer reflect the organization's current fuel consumption, budget priorities, or tolerance for market volatility.

Because of this complexity, businesses should periodically ask whether their purchasing approach remains aligned with their operational and financial goals, or whether they continue to use it simply because it is familiar.

The objective should not be limited to finding the lowest fuel price available on a particular day. A strong purchasing strategy should help the business manage price exposure, improve budget planning, maintain reliable access to fuel, and understand how fuel expenses are changing over time.

Start With Your Business Objectives

Before evaluating fuel purchasing options, it is important to define what the strategy needs to accomplish.

Some businesses prioritize the lowest possible average cost, while others place greater value on budget predictability, margin protection, supply reliability, or protection from sudden price increases. Most companies need to balance several of these priorities.

A transportation company operating on narrow margins may value price certainty because a rapid increase in diesel costs could reduce profitability. A company supporting essential services or time-sensitive deliveries may be more concerned about maintaining fuel access during a disruption. Another organization may have enough budget flexibility to remain exposed to market prices and benefit when prices decline.

The right strategy should reflect the organization's risk tolerance rather than depend on correctly predicting the market's next move.

Comparing Common Fuel Purchasing Approaches

Fuel buyers have several pricing options, each offering a different balance of certainty, flexibility, cost, and market participation.

The most appropriate approach depends on consumption volume, demand predictability, budget requirements, regional risks, and tolerance for price volatility. Buyers should also understand which parts of the delivered price are covered. An agreement may protect the market-based commodity component while leaving freight, taxes, supplier margins, and regional differentials subject to change.

Spot Pricing - Spot or market-based pricing allows a business to purchase fuel at current market rates. Commercial pricing may be tied to a published wholesale benchmark, with freight, taxes, fees, and supplier differentials added to determine the delivered cost.

This approach allows buyers to benefit when prices decline, but it also leaves them exposed to market increases. It can work for organizations with flexible budgets, uncertain demand, or a greater tolerance for short-term volatility.

Fixed Pricing - A fixed-price strategy establishes an agreed price for a defined volume and period. Fixed pricing can improve budget certainty and protect the covered market component from increases. However, the business may not receive the full benefit if market prices later decline. This does not necessarily mean the strategy was unsuccessful. Fixed pricing is intended to reduce uncertainty, not guarantee the lowest available price.

Price Caps - A price cap establishes a maximum price for the covered market component while allowing the buyer to benefit if prices fall.

This option may appeal to businesses that want protection from a major increase without fully fixing their price.

Collars - A collar establishes both a price ceiling and a price floor.

When the market remains between those boundaries, the buyer generally pays the applicable market-based price. The ceiling protects against increases above a defined level, while the floor limits the benefit if the market declines significantly.

Depending on its structure, a collar may reduce some of the cost associated with a price cap. In exchange, the buyer accepts a minimum price. This approach may be suitable for organizations that prefer to keep prices within a defined range rather than fully fixing them.

Layered Pricing - Layered pricing divides purchasing decisions across different dates, volumes, or market levels. Instead of protecting the entire expected requirement at one time, the company may secure portions of its forecasted consumption throughout the year. This reduces reliance on a single market entry point and allows the strategy to adjust as forecasts and business conditions change.

Layering does not guarantee a lower price. Its value comes from reducing timing risk and creating a more balanced pricing position.

How Mansfield Can Help

Fuel purchasing isn't one-size-fits-all. Whether the goal is improving budget certainty, managing price risk, guaranteeing dependable supply, or balancing all three, Mansfield partners with businesses to evaluate their options and helps make informed fuel purchasing decisions that align with their operational and financial goals.

A periodic review of your fuel purchasing strategy can help ensure it continues to support your business's needs today. If you haven't reviewed your strategy recently, now may be the right time to ask an important question: Is your current approach still working for your business, or is it simply the strategy you've always used?