Fuel management and operating costs

Last year was a very difficult time for fleet budgets because of the major swings in the oil prices. Some major companies ran out of their fuel budgets after only six months as the oil price continued to climb to the $80 level. This obviously led to major increases in operating costs where fuel costs for a medium car’s operating costs represented nearly 40% of total costs.

Right now the oil price is has been continuously climbing from the $45 range to its current price of some $78. I guess the big question is ‘Will it go up or down over the next twelve months?’ Well, one of the big forecasting groups in the US indicates that it will continue to increase in 2010 to about the $110 level. On the basis of these increases, we could see a price of about R9.75 per litre.

Definitely not a happy thought in terms of fleet operating costs!

Our belief is that any prudent fleet operator should be reviewing this year’s fuel budgets with an oil price of at least $90 a barrel.

A 15% increase in vehicle operating costs last year coupled to another 17% increase in 2010 (the Fleetcube estimate) has to be a major concern for any company. There is a double cost squeeze in terms of falling revenues and rising vehicle operating costs. The operating cost increases will mainly come through rising vehicle prices, a shortage of vehicles from the manufacturers and the resultant extension of replacement cycles. This will also lead to increases in maintenance costs.

One solution to cutting back on operating costs will be to give serious consideration to ‘charge backs’ for private use of company vehicles. The other core solution will be to install tracking devices to monitor usage. One major company did a test run on doing this and found that some 55% of vehicle usage was outside of its normal working hours!

Vehicle asset management will start to become a big issue with fleet owners as they evaluate the fleet’s ROI. This can only be done successfully by implementing a sound assest management programme linked to a tracking system

So it’s back to usage management and operating costs budgets that will always need constant review. Get more assistance on this by using the budgeting forecasting calculator on our website. Click here.

Give us a call on 011 782 9211 if you need help on these issues related to your asset management programme. Fleetcube has developed a specific programme to assit you with your Vehicle Assest Management (VAM).