Plan Insurance Blog

How fleet managers can save money on the cost of fuel

The cost of running and maintaining a fleet has steadily been rising. The first half of 2018 has seen the total vehicle operating costs for fleet vehicles increase by 2.5%, with the largest contributor being the cost of fuel.

After many years of working in a petrol station, I got used to being the target of customers frustrations every time fuel prices went up. Many thought the high rises on the pumps were down to the greedy petrol stations that just wanted to make more profit. But what many people did not realise, was that the price of fuel is expensive before it even reaches the pump, and as most petrol stations compete fiercely to have the lowest price, there is very little margin left by the time it gets to the retailer.

Oil prices and fuel tax

There are a number of factors that affect the price of oil; in May, oil prices reached more than $80 a barrel, the highest level in three and a half years.

Recent tensions in the Middle East, where 6 out of 10 of the countries with the world’s biggest oil reserves are located, as well as troubles in North Africa have caused petrol prices to go up.  Countries such as Iraq, Kuwait, Libya and Syria have all been involved in conflicts in the past decade with the latter tragically still ongoing. Saudi Arabia has one-fifth of the world oil reserves and is the largest producer and exporter of oil in the world. Recently, the Saudi government announced they were suspending oil shipments through the Red Sea after Yemen’s Iran-aligned Houthis attacked two tankers. Iran also threatened to block the Strait of Hormuz, the other major strategic shipping route for oil from the region, in its row with the United States over sanctions.

Factors closer to home also have a big impact on fuel prices. As oil is traded in US dollars, the weaker sterling has made it more expensive for firms to buy fuel. Fuel tax (or fuel duty) has been frozen at a rate of 57.95p per litre for both petrol and diesel since 2011, but recent government plans to lift the freeze could result in fuel prices rocketing. Added to the uncertainty surrounding the outcome of Brexit, it is unlikely fuel prices will be decreasing any time soon.

Embracing technology and going electric

More sophisticated technology is coming out to help Fleet Managers get the most out of their fleets. Data from fuel cards, fuel management systems and telematics can help track fleets to better manage and monitor where and how the vehicle has been driven, and provide invaluable insights on how to reduce wasted mileage. These technologies can help to identify any drivers that need extra training to become more fuel-efficient, as well as flag any vehicles that should be replaced.

There has been a strong increase in plug-in and hybrid registrations, as consumers start embracing alternative fuels and electric vehicles. This trend has been mirrored in commercial fleets with  The Society of Motor Manufacturers and Traders (SMMT) reporting that business vehicles accounted for 65% of new electric vehicle registrations in the first six months of 2017.

Ovo Energy, Oxford City Council, Santander UK, Swansea University, Britvic, The London Fire Brigade, Microsoft UK and Gatwick Airport have all joined the government-backed Go Ultra Low campaign, which sees companies pledge that electric vehicles will make up at least five per cent of their fleets by 2020.

By going electric, fleets would be more reliable, more sustainable and less susceptible to volatile fuel prices. According to the Future of Fuel report from Hitachi Capital UK, if all of the UK’s vans and heavy-goods vehicles switched to electric, companies could save £13.7bn a year. There are plenty of electric options for all sizes of fleets with even more vehicles being released in the next year. Ranging from Nissan E-NV200 and Citroën Electric Berlingo vans to the bigger Mercedes-Benz eSprinter, and manufacturers like Tesla, DAF, Volvo and MAN are all planning to release electric and hybrid lorries. This would, of course, require a great deal of upfront capital. However, the report estimates that electricity would be around 15p per mile cheaper than petrol or diesel for vans. With the combined annual mileage of commercial vehicles in the UK totalling 65.7bn, the savings would soon add up.