Opinion

Low-cost fuel is fleeting

What do fuel prices and Madonna have in common? When they fall they get back up. Short term, low fuel prices are welcome – but it's a fleeting luxury. The best fleet managers keep their sights on the wider horizon. Mid 2014 oil prices fell to a five year low. Unimpressive economic growth in China and Europe – and America's new lust for shale oil – look set to hold prices down for now. Fleet managers can rejoice. Right?

Well sort of. A double digit percentage price drop for both diesel and petrol in 2014 served Alphabet's UK customers well. In the latter five months of 2014, clients saved €14.4 million on fuel; which works out at some €110 per vehicle. Crude maths suggests that's a saving of €22 a month on fuel for each car. At that rate, a vehicle fleet with 10,000 cars would save near a quarter of a million Euros every month.

Fuel cost is put at around 30% of TCO in Western Europe, so such considerable savings in this area bodes well for fleet manager and his company. But this isn't a game changer – it's just a nice moment. Sure, the natural laws of fleetconomics dictate that cheaper fuel equals cheaper TCO. But in this case, natural laws don't apply, as what goes down must come up. 

That's how it is with fuel. Before we explore that, it's best to assert from the off that fuel costs are, according to the experts, less important in the TCO structure anyway; they deem other elements such as maintenance and tech as superior areas for focus and spend. Fuel is just fuel. Low or high, it's a constant cost-base while driver behaviour, for example, is a more complex investment; and a potential cost-saver and added value tool.

In a big picture fuel sense, the world's vehicle pool has increased 35% since 2005, but the supply of fuel has risen only by 12%. As lower oil prices discourage further exploration for new sources, this discrepancy is likely to grow. And that makes future price rises all but inevitable.

Then there's the fact that the fuel landscape changes on a dime. We're always an economic, social or political fracas away from a spike – and there's plenty such threats in today's world. If things remain as is, you can bet OPEC will soon make its move.

So, basically, it's business as usual - but with extra pocket money. Have fun investing and tightening in other fleet area, enjoy our moment in the sun. Using funds to make lasting changes to the fleet - perhaps by scaling up on more efficient vehicles - is a good way to write this moment into company history.

But don't compromise efficiency, or the long-term. Because, by hook or by crook, high cost fuel will haunt us again.

Authored by: Steven Schoefs