January 2010, Business Fleet - Department
Pricelock Gives Fuel Budget Security
By Chris Brown
In recent news, analysts for the Association for the Study of Peak Oil & Gas-USA predicted that gas could reach $4 per gallon in 2010. Hearing that information will no doubt frighten fleet owners big and small, who would be faced with a substantial rise in their annual fuel budget.
Redwood City, Calif.-based Pricelock is an online service for fuel price protection that is meant to protect fuel budgets from volatile fuel prices, says Robert Fell, founder and CEO of the company.
"Larger fleets have always had some type of fuel price protection because of their sheer size," Fell says. "The biggest thing for small businesses is to be able to predict their cost lines for fuel, but small fleets have not had an opportunity to price-protect their fuel."
How Pricelock Works
Customers must pay an upfront fee that runs between 5-10 percent of their maximum fuel spend based on the current market conditions, protection price and protetion period, whereas fuel prices can move as much as 60-70 percent. Clients provide Pricelock with an estimate on their fuel consumption, such as whether they use regular gasoline or diesel and number of gallons per month.
From there, customers can choose how long they would like to be protected (time spans range from three to 18 months), at what fuel price they would like to be protected and how many gallons to protect. Should fuel prices go over the desired protection price the consumer has locked in at, Pricelock will pay out the cost difference.
Whether the fleet actually uses that amount of fuel is immaterial - Pricelock will pay the customer back for the amount of fuel protected.
Small Fleets Sign On
For Scott Scarpato of West Newton, Mass.-based Automatic Laundry, a laundry facilities management company, signing up for Pricelock was a way to self-protect his company from outrageous gas prices.
Automatic Laundry has more than 30 vehicles in its fleet and each vehicle averages 50,000 miles a year. In 2007, the company spent $145,000 in fuel. In 2008, due predominantly to higher fuel prices, Scarpato spent $275,000. That near doubling of his fuel budget forced Scarpato to begin searching for some peace of mind.
The company uses contracts to manage and service its laundry rooms, so installing a fuel surcharge mid-contract was not an option. Scarpato and his team researched numerous programs to assist in maintaining the fuel budget. Some programs, which seemed more suited for larger fleets, included fuel hedging and buying fuel futures. Not only was Scarpato hesitant to buy fuel he may not use, "Some of the other programs had an awful lot of management issues," he says. "The administration costs would have outweighed the benefit of buying the contract."
Scarpato liked that with Pricelock the fleet does not have to record and provide actual number of gallons of fuel used, which cuts down on paperwork.
Though he had to pay an undisclosed premium he says, "[It] wasn't a lot of money compared to the protection our company has from these huge swings in gas prices."
Currently, Automatic Laundry is locked in at $3.15 per gallon for gas for 12 months.
On deciding how to lock in at that price, Scarpato says, "When gas hits that level, we don't want to spend more than that. Anything under that, we can live with. We've turned this variable cost into more of a fixed cost or at least a very predictable cost."
For more information, visit www.pricelock.com or call 877-754-2710.