Market Trends

Fuel Continues to be the No. 1 Threat to Fleet

October 10, 2008

by Mike Antich - Also by this author

By Mike Antich

The number one threat to fleets continues to be the price of fuel, despite the fact that fuel prices have been declining due to the global economic slowdown. Year-to-date, the cost of fuel has increased 30 percent in 2008 compared to 2007. The Energy Information Administration is projecting fuel to slightly increase in calendar-year 2009, with the price for regular unleaded gasoline to average $3.82. To give an idea of how out of kilter our perception of reality has become, many think $3.82 is a good deal for gasoline.

Although our attention is currently fixated on the meltdown of the global financial markets, it is my opinion that fuel continues to be the Sword of Damocles hanging over fleets. All it will take is one Katrina-like hurricane disrupting Gulf Coast refineries or a fully laden supertanker sunk by terrorists in the Strait of Hormoz to send fuel prices rocketing skyward. Fuel is the potential game changer of the fleet industry. Consider two recent examples as possible harbingers of things to come.

An article recently published in Fleet Europe magazine stated the increased use of videoconferencing has caused a decrease in the use of company cars in Europe. The article quoted Masterlease, a European lessor, whose parent company is GMAC Financial Services, as saying more and more international companies are decreasing business miles driven due to the high cost of fuel, along with corporate initiatives to decrease CO2 emissions. In the article, Masterlease CEO Nick Brownrigg, who manages a global portfolio of 210,000 vehicles, cited a survey by The Ethical Corporation, which revealed CO2 emissions per European employee dropped from 0.62 tons to 0.57 tons between 2006 and 2007. This decrease was the result of a decrease in business miles driven. One reason Brownrigg gave for the decrease in mileage was due to the increased use of videoconferencing as a reaction to higher fuel prices. Some Europeans, who pay the equivalent of $6 per gallon for gasoline, find videoconferencing a cost-effective alternative to in-person visits.

For another perspective on this, read my July 31 blog entitled “Will You Need Fewer Vehicles in an Era of Hyperconnectivity?” Click on

Fuel scarcity can also be another game changer for fleet. Consider this recent example. Last month, when Hurricanes Gustav and Ike caused gas shortages in the Southeast U.S., it prompted a change in how many companies operate. Hurricanes Gustav and Ike, which made U.S. landfall Sept. 1 and Sept. 13, respectively, disrupted fuel production in the Gulf of Mexico. According to Network World magazine, the resulting gasoline shortages prompted companies in the region to expand “telework” programs so employees could conserve fuel. In the Atlanta metro area, the gas shortage caused companies to redouble their efforts to formalize or expand telework programs, said The Clean Air Campaign, a nonprofit organization that works with Georgia employers to reduce traffic congestion and improve air quality.

These two isolated incidents reveal how the dynamics of fuel (either by price or scarcity) can easily produce change in our industry. My prediction is that there is much more change yet to come.

Let me know what you think.

[email protected]

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Mike Antich has covered fleet management and remarketing for more than 20 years and was inducted in the Fleet Hall of Fame in 2010.

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