The fuel industry is a highly complex sector with several tricky parts, such as buying fuel in bulk. It’s not practical to learn everything about buying fuel in bulk in one article, but having the right knowledge can be helpful in making an informed decision. To get started, we can educate ourselves about the basics of buying bulk fuel. Here are the top four tips to help you get the best value when buying fuel in bulk.
Find a Trusted Supplier
It’s important to build good relationships with reputable suppliers in the fuel industry since the sector is very dynamic. Before booking a supplier, find out about their availability, accessibility, and responsiveness. Unreliable suppliers unable to deliver fuel on time can harm a company’s reputation. Also, ask the supplier for their source of fuel. Ideally, go for those with multiple sources to have better chances of consistent supply.
Sign a Fixed Contract
Buying fuel in bulk comes with two options:
- Buying on the spot: Purchasing fuel without any fixed schedule or delivery parameters.
- Buying through a contract: Entering into a contract with the supplier with a fixed schedule for the delivery.
Spot buying can have varying rates and cost more, which is why it’s always a good idea to buy fuel in bulk through a fixed contract. Moreover, a contract allows for budget forecasting, which can help streamline cash flow.
Check Oil Price Benchmarks
We should always check the benchmark our supplier uses to charge us for the fuel. We suggest entering into a contract with the supplier based on the fuel industry benchmarks, such as the Oil Price Information Service (OPIS), the European Power Exchange (EPEX SPOT), and the New York Mercantile Exchange (NYMEX). These standards ensure price transparency in the process of buying fuel in bulk.
Purchase a Call Option
Airlines use the call option strategy a lot since it helps reduce losses. With a call option, a company can purchase fuel at a specific price for a stipulated date range, irrespective of price fluctuations. For instance, let’s assume that the price of a gasoline barrel is $60 today. A company with a call option to purchase the oil for $70 within 60 days can buy the barrel for $70 even if the price increases to $90 within that period.
In addition to these four tips, we should keep track of industry trends and benchmarks. When purchasing fuel in bulk, let the supplier know that you understand how an index deal operates.
Keeping yourself updated with the changing fuel prices, various industry standards, and trends can be a lot to manage. This is where Reeder Distributors come into the picture. We have been a leading wholesale fuel supplier for over 40 years, serving our clients with nothing but top quality and transparency. Get in touch with us today if you have any bulk fuel-buying needs. We’ll take it from there.