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Fuel management: Industry overview

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When fleet managers talk about fuel management, what they really mean is cost management.

The price of petrol and diesel has rocketed and is staying high – despite short-term price wars – meaning the cost of keeping vehicles moving on the road is spiralling.

Fuel costs are really hurting British business and fleet decision-makers are under the spotlight to do something about it.

In addition to millions of extra pounds flowing from business accounts every year, higher prices bring the increasing problem of fuel fraud, with employees attempting to use company money to pay for their own private fuel use.

Diesel costs have risen by more than 34 pence per litre (ppl) – more than £1.50 per gallon – since June 2007, costing a typical 50-vehicle diesel fleet, with each driver covering 15,000 business miles a year, almost £23,000 more in fuel, according to leasing giant LeasePlan.

Figures from the AA show that the average cost of unleaded in August 2007 was 96ppl and diesel was only slightly pricier at 97.0ppl. Those costs now stand at 113ppl and 126ppl respectively.

But according to the IAM Motoring Trust, the policy and research arm of the Institute of Advanced Motorists, fuel prices could rise even higher by the end of the year.

“If crude oil prices stay at their current level, or rise even higher, Britain’s motorists can expect another 20 pence rise in the price of a litre before the end of 2008, bringing closer the prospect of the 150 pence litre,” says Tim Shallcross, head of technical policy at the IAM Motoring Trust.

This sort of warning is having an impact on many fleet operators, who are taking action to stem the tide of money flowing into the fuel tanks and out of the exhaust pipes of their vehicles.

However, where businesses are not effectively monitoring and managing their fuel costs, it is a different story.
Stewart Whyte, managing director of fleet consultancy Fleet Audits, says: “The rate of increase in fuel costs has provided a loud and clear alarm for fleet operators.

"Fuel economy is now firmly on the agenda, but reaction and approach varies widely from fleet to fleet.”

A recent survey found that 49% of fleets running fewer than 50 vehicles had taken no steps to minimise the impact of fuel price increases.

And 29% of larger fleets also said they were taking no action, according to a survey of 500 companies by Northgate Vehicle Hire.

Yet a vast array of solutions are available, many of them free and relatively simple to introduce, as they merely entail changes to management policies and effective driver management.

Peter Eldridge, Inchcape Fleet Solutions’ head of maintenance and accident management and secretary of the Institute of Car Fleet Management, says: “Drivers must be encouraged to buy fuel from outlets promoting the best deals, perhaps with a ‘capping’ system when reimbursing the business element if a pay-and-reclaim system is used.

"Another important element is to evaluate all new potential fleet vehicles and re-evaluate existing ones to ensure that vehicle choice fully promotes the most efficient fuel economy type.”

Cleaner fuels and more fuel-efficient cars might make a difference, while the real-time vehicle, driver and journey data provided by telematics can help to efficiently manage vehicle usage.

Mr Eldridge adds: “The most important aspect of any fuel strategy is to reduce the need to travel. Introducing policies to promote remote working and video-conferencing still allows employees to fulfil their work commitments and is a practical proposition for many businesses.”

For most businesses, however, travel is essential, so effectively managing the actual provision of fuel and closely monitoring its cost is the most important step.

There are four main solutions for managing fuel. Fuel cards, reimbursement by fixed mileage rate, reimbursement at cost and bunkering.

Each method presents its own challenges and all need careful management.

For example, fuel card reports can be rendered useless by inaccurate mileage readings handed over by drivers, while fixed mileage rates can lead to employees creating phantom trips to boost their monthly expenses claim.

Neville Briggs, managing director, of fleet software solutions firm CFC Solutions, says rising prices will lead to increased fraud, largely confined to fleets with a pay-and-reclaim system where company car drivers pay for fuel themselves and submit receipts for reimbursement at the end of every month.

Briggs argues that pay-and-reclaim offers almost no control over fraud, but admits that even fuel cards are not immune if an employee is determined to steal fuel.

He says: “We have heard of at least one case where a driver partially filled up his vehicle at a pump and then his wife pulled in behind to have her tank filled too. This showed on the pump as the same purchase and he paid using a company fuel card.”

The main way fleets can help prevent fraud is to monitor and manage whichever system is used, ensuring that excessive mileage, very large transactions for a single fill-up or very poor fuel economy are picked up early.
 

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