Companies can mitigate the blow of the relentless rise in the price of fuel

Standard Bank’s fleet card transaction data shows that fleet users paid an average price of R14 per liter of diesel in January, which means it cost R3 360 to fill a 60-liter tank four times in a month. .

Now, however, with the price settling at R20 / liter, the fleet user would have to shell out over 40% more (R4 800) for the same amount of fuel. When you extrapolate the cost for 11 months, it’s an extra R15,000 / year.

Today’s price per barrel of Brent crude oil ($ 75 / barrel) is a far cry from the price per barrel of $ 18 / barrel that Brent crude recovered in April 2020 due to a market glut during the outbreak of the pandemic. COVID-19.

The drivers behind the rising fuel prices

The picture has changed dramatically with an under-supply in the market which now largely drives up the price of crude oil.

Of course, the Organization of Petroleum Exporting Countries (OPEC) wants to sell the commodity at a high price, but many of its members (oil producing countries) are tired of the current prices as they believe Elon Musk could kill the oil industry with electric vehicles.

In other words, if OPEC doesn’t lower the price, it could accelerate the transformation from gasoline or coal-powered vehicles to electric vehicles.

Therefore, there is reason to believe that there may be a reduction in fuel prices in the coming months.

The US and China have what are known as strategic reserves, some of which will be released to the market, and while there is no guarantee that they will materialize, they could generate some cost savings soon.

More companies travel but face high transport costs

There has undoubtedly been an increase in road users and an increase in the amount of fuel consumed for logistical purposes, especially after the arrival of COVID-19 and a consequent increase in online purchases and in the demand for home delivery of essential goods. such as groceries.

While the number of liters of fuel consumed for typical passenger cars has decreased by 30% due to the shift to remote work, medium and large commercial vehicle operators shifting everything from production inputs to goods and services, have increased significantly.

Following the changes in consumer buying behavior over the past couple of years, it has become critical for companies to gear up to deliver home deliveries or upgrade existing fleets.

But the cost of transportation fuel, which increased by more than 41% between January and December with inflation at that time at 5%, is putting a lot of pressure on businesses, particularly those unable to pass these increases on to its customers.

Additionally, toll rates increased by 4.8% in March while maintenance increased by 5%. Not to mention the other cost pressures companies face outside the transportation sphere.

Lower the rising cost of fuel

In today’s environment where fleet capacities remain a business imperative, but rising freight costs and expenses continue to weigh on cash flow, focusing on savings and efficient ways of managing fleets is key to maintaining key assets such as people and vehicles.

One way to keep fuel costs low is to participate in a diesel savings program.

Through partnerships with major oil companies, Standard Bank’s diesel savings programs save their customer base millions of rand, enabling them to purchase diesel at preferential prices across the country.

A fleet of 10 vehicles using 20,000 liters per month typically saves around R15,000 per month or R180,000 per year on a Standard Bank diesel savings program.

Standard Bank also recently launched Visa Fleet Card, South Africa’s first chip and PIN fleet card.

Visa Fleet Card is protected by a PIN and is very difficult to clone.

Visa Fleet Card is issued to petrol vehicles with dedicated drivers. In addition to increased security, they have the added benefits of reduced fees.

Another area where companies often miss out on savings opportunities is the lack of risk management and control.

This comes down to the availability of information on daily fuel consumption and driver behavior. When introducing a fleet card into a fleet, analytics reports are made available in real time which help highlight if a vehicle or driver is moving uneconomically, determine the causes, respond appropriately and initiate savings to cushion the impact of fuel cost increases among other things on business.

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