The diesel and gasoline market is extremely volatile, and prices can fluctuate greatly on a daily basis. If your company is in the fuel business or uses large quantities of diesel fuel, the ability to lock your prices in on an annual basis can give you the edge when it comes to getting the best price possible and making a profit. A fixed forward contract can guarantee you pay the same price for one year on wholesale diesel purchases. Here is how the contract works and how it can benefit you.
How the Contract Works
In order to obtain a fixed price on wholesale diesel purchases, you'll need to obtain a fixed forward fuel contract with a supplier. This contract will provide you with a very important tool that can help your business manage the constantly changing costs of fuel. The contract provides you with a guaranteed, set price for one year as long as you continue to make your purchases through the selected supplier. The supplier benefits from the contract because you've agreed to purchase solely from them, and you benefit by getting the same price on all of your purchases. You will need to identify the volume you plan to purchase throughout the year, as well as an average estimate of how many gallons you need per month. The supplier will deliver the fuel based on your individual projected needs and reserve the fixed price for you in writing.
What are the Benefits of These Contracts?
There are many benefits to obtaining a fixed forward fuel contract. First, you'll be able to better predict your company's overall budget since you will know what your fuel costs will be. This can give you more money to utilize towards other things like overhead costs, building and vehicle maintenance, or obtaining new equipment. You can also avoid worrying about the unpredictable fuel costs throughout the year, since your locked in price will be guaranteed. There will be no need to constantly monitor the price of fuel, which can cost you valuable time and add to frustration. The contract will also give you a dependable supply of diesel fuel since you've given the distributor the amount you need each month. They'll simply bring it to you automatically and you will no longer have to chase it down or shop around. By locking in your wholesale diesel fuel costs, you will get peace of mind and the ability to use your cash flow for other important projects and expenses.