Who Else Buys on Fixed-Forward Contracts?
“Just Plane Smart” is more than an advertising slogan for Southwest Airlines. It defines the company’s approach to cost management—fuel costs, in particular.
Southwest leads the pack when it comes to hedging fuel expenses using fixed-forward-type contracts. For many years the airline has been able to steer clear of most of the steep swings in fuel costs that have driven other airlines into bankruptcy. Southwest has saved millions of dollars in fuel by locking in one, stable price per gallon over an extended period of time. Though it may not always pay the rock-bottom price every time, unlike most commercial carriers, Southwest has strategically used fixed-forward contracts to help insulate itself from the sky-high fuel costs that grounded much of its competition.
That same edge benefits our fixed-forward contract customers who enjoy fixed fuel costs without the burden and daily aggravation of hunting for what may or may not be the “best” price around. You, too, can lose the stress that wastes your valuable time and health, both of which carry their own price tag, and are extremely hard to recover, if at all.
Imagine it: You can save money AND have more time to enjoy some of the reasons you went into business in the first place. What a concept!
A Fixed-Forward Contract May Be Just What You’re Looking For
Sometimes we get so used to something, we take for granted it’ll always be that way. Like roller coaster fuel prices: “Always erratic, uncontrollable, and very temperamental”—triggered by the least little thing, or nothing at all.
A fixed-forward contract means you “lock-in” a set price per gallon that is guaranteed throughout the contract period, regardless of how crazy the market behaves.We’d like to introduce you to the “New Normal” when it comes to shopping for and purchasing wholesale fuel: A consistently stable, per gallon, price—guaranteed in writing for a time period of your choice, anywhere from a month up to a whole year.
It’s what we call our “Fixed-Forward Pricing Program,” and it could be just what you’re looking for to tame the fuel price juggernaut. Check it out…
4 Questions Every Fuel Buyer Should Ask:
Q Is a Fixed-Forward Fuel Contract Right for Me?
Many of our customers are looking for a better way to forecast fuels costs, and locking in prices is a powerful budgeting tool to weather the unpredictable swings in the market. If that includes you, Desert Fuels wants to offer you a guaranteed way to convert one of your most volatile costs to a fixed line item in your budget. Companies that want to guard against huge swings in operating expenses and protect bottom-line profitability often choose to benefit from a fixed-forward fuel contract.
You too can experience that rare feeling of knowing you’re consistently paying a fair, reasonable, and stable cost instead of getting regularly nailed by higher and higher prices while regretting that you didn’t buy when fuel was much cheaper.
Q How Does a Fixed-Forward Contract Work?
Bulk fuel buyers who choose fixed-forward contracts often purchase around 50% to 80% of their projected fuel budget at a fixed price for the year, shielding themselves from uncontrollable price swings, while betting the balance of their budget on the constantly fluctuating prices that drive the market each day.
It’s Easy as 1-2-3.
1. Name your fuel product and the amount you need per delivery.
2. Tell us how many gallons you want to purchase per month (we suggest at least 50%).
3. Choose how many months you want the fuel delivered (anywhere from 1 to 12). We’ll do the math and guarantee a set price for those months.
A Hypothetical Case In Point…
“Fast Fleet,” a local contractor in Nebraska, goes through about 700,000 gallons of diesel per year, with an annual fuel budget of $2,500,000.
After looking into discount opportunities, their buyer decides to purchase 80% of their fuel (560,000 gallons) on a fixed-forward contract. Their supplier (that would be us) then evaluates the market’s performance and advises Fast Fleet, when the market is as favorable as possible, to lock-in a per gallon price that multiplies out to 80% (or $2,000,000) of their total budget.
In this case, Fast Fleet’s strike price would be $3.57 or less per gallon (delivered), giving them a hassle-free, per gallon price for the entire year, ensuring they’ll be within budget for the 80% of their fuel volume they chose to protect under a fixed-forward contract.
For the remaining 140,000 gallons, Fast Fleet will purchase at those fickle, daily rack prices—some days more, some days less, than the guaranteed, fixed-forward price they locked-in to cover 80% of their fuel needs.
Q What are the Benefits of going with a Fixed-Forward Contract?
- Accurately forecast your budget, and actually come in at or under it
- Level the pricing playing field
- Avoid unforeseen fuel costs
- Smooth out your cash flow
- Take away the daily anxiety of the market’s endless price swings
- Enjoy a dependable supply of fuel
- Protect your fragile profit margins
Q What are the Downsides of a Fixed-Forward Contract?
There are none, if you stick to your budget. A fixed-forward contract doesn’t mean you’ll pay the lowest price per gallon everyday. Rather, you’ll benefit from a steady, even price, undisturbed by a market roller coaster that’s not much different than a daily dice-throw. (They say, gambling can be fun, just not when you’re using your own money.)
How Can Desert Fuels Help?
When it comes to how to save money on fuel, we tell you what other suppliers won’t, and we’re glad to do it. We’re pros at structuring fixed-forward fuel contracts, and will design one that’s just right for your needs.
Call us today at (888) 750-FUEL (3835), or drop an email to [email protected], to discuss your fuel requirements and how a fixed-forward contract can be a great bottom-line planning tool for you. We’re available anytime to answer your questions and get you the facts you need to make what can be one of the smartest business decisions you’ll make this year.