Unveiling the mystery of…
Fuel Price Fluctuations
Fuel prices play a big part on budgets and when you’re running a fleet, even the slightest change can impact your bottom line. We look at why prices fluctuate, and what to do to protect your business against it.
There are four main factors that affect fuel prices: crude oil prices, refining costs, taxes, and supply and demand.
Crude Oil Prices
Fuel prices are closely tied to the global crude oil market. These prices are mainly driven by international supply and demand. A significant portion of Europe’s oil imports come from countries like the US, Saudi Arabia, Russia, and Canada..
The Organization of the Petroleum Exporting Countries (OPEC) plays an important role in shaping the crude oil market. OPEC sets production targets for its 13 member countries, and there is a strong correlation between these decisions and oil prices.
Before crude oil can be used as petrol, it must be refined, which adds another layer of complexity to fuel pricing. Crude oil refineries are located around the world, with US, China, Russia and India leading the way. The cost of refining varies due to factors such as the type of crude oil used, refining technology, and regional specifications. Also, distance from supply sources, including refineries, ports and pipeline terminals, can mean higher transportation costs
Governments set their own prices when it comes to tax on petroleum products. As sustainability becomes a larger conversation, governments are under pressure to tax fuel companies higher.
Supply and Demand
A surge in demand for fuel, both domestically and globally, can boost prices significantly. Fluctuations can occur due to supply disruptions to pipelines or maintenance to refineries, and results in reduced supplies, meaning bids for available supplies are increased. Seasonal variations also play a part, with prices rising in the spring and peaking in late summer when people typically drive more frequently.
Regional differences and events affecting fuel prices in Europe
There are differences between countries and regions when it comes to fuel prices too, including:
Competition. Some retailers can be influenced by traffic patterns or brands wanting to attract customers with cheaper fuel to encourage them to buy other items. Retailers in most European countries set their own fuel prices, based on their costs and the margins they want to make.
Operating costs. It’s more expensive to have a fuel station in city centres than smaller towns where rents and costs are lower.
Environmental programmes. Some governments heavily promote electric vehicles over fuel ones, while some regions require special fuel formulations with additives to reduce emissions which leads to increase in cost of production, storage and distribution.
The coronavirus pandemic had an enormous impact on distribution and retail costs, which in part is still affecting fuel prices today.
Russia’s invasion of Ukraine in 2022 led to the European Union cutting imports of Russian oil by two-thirds, reducing the supply and pushing up costs.
How to reduce the impact of fuel fluctuations on your business
Monitor fleet metrics like vehicle condition and maintenance expenses. This can help you identify and address potential issues before they become costly. WEX telematics can help. It allows you to track your fleet on the go, monitor and improve driver performance, and more.
Plan optimal routes: Well-planned routes can reduce distance and save fuel. Optimal routes should consider the specific needs of different types of vehicles, such as avoiding steep hills for HGVs or navigating congested areas for light-duty vehicles.
Invest in regular driver training, even for experienced drivers. This can instil good habits that improve fuel economy, including raising awareness of issues like vehicle idling, high speeds, high torque, and harsh braking.
Use a Fuel Card service like WEX. You can enjoy discounted rates on a selection of local stations, 1000s of locations, multiple fuels and excellent network coverage, which helps you choose the lowest price fuel.
Find the nearest station, with pricing, saving time and money on inefficient route deviations. Use our fuel station finder. There’s a handy app, map, PDF or email version available to both drivers and fleet managers.