Have you ever been to Las Vegas, Atlantic City, horse racing track or bet on a football game? Do you feel like you're going to win? Of course you do or you wouldn't go for the action.  But we all know those places weren't built on people winning money; they were built on people losing money.

Now, you're sitting at your desk and you're putting together your fleet fuel budget for the next few months, or all of next year. Do you have that same sense of fun and adrenaline that you have when you're playing those games?  Are you betting that diesel fuel prices won't go higher?  Or are you betting they won't go lower?

My advice is not to bet on diesel fuel prices doing anything.  It's the one commodity that will kill you every time, because just when you think it can't go up anymore, it goes higher.  And just when you thought your fleet fuel price was going to go higher, it falls like a brick.  So instead of having this happen, do what most of the larger companies do, and that's manage the fleet fueling risk you have with diesel fuel prices. You can call it hedging, futures, fixed pricing or buying a call opinion or a putt on fleet fuel but I like to call it buying fuel insurance. 

Here is how it works in a way I find easiest to explain to people who are both gamblers and non gamblers alike.  Let's think about diesel fuel prices the same way you do about truck insurance, but let's take the part out that is required by law. Your company buys truck insurance to protect its asset; the truck. The truck is worth a lot of money and if the driver causes an accident, or your truck gets hit by an uninsured or underinsured motorist, your company wants cover to cover the costs of getting that truck fixed.  You pay a few dollars each month or year to the insurance company for coverage, which is more expensive the lower your deductable.

With diesel fuel prices, you go out to fleet fuel market to determine what fuel is selling for over the period of time you are budgeting and you make your budget. Let's say it is $3.00 a gallon for next month, but 11 months from now it's pegged at $3.15 a gallon. Your average price works out to be $3.07 a gallon.  The fleet fuel supplier will add a couple of cents a gallon for themselves, so overall you're paying $3.10 for all of next year. If the price of fleet fuel sells for more than $3.10 during the year, your company looks like a winner. If the costs of fleet fuel is sold for less than $3.10 during the year (let's say its $2.70) you look like a loser by 40 cents per gallon.  But are you?

You spend tens of thousands of dollars each year on truck insurance.  At the end of the year, that's a big number on your profit and loss statement if your trucks were only in a couple of minor accidents, or maybe even no accidents at all. Do people look at you and say that guy is a loser; he never should have had truck insurance? No, of course not.  Why? Because by having the insurance he is able to mitigate risk against his company. If he didn't have insurance and a big accident happened, then what?  Buying fleet fuel at $3.10 that only ends up costing $2.70 a gallon doesn't make you a loser. You budgeted $3.10; you paid $3.10.  You took the risk out of your fleet fuel program by having this insurance in place. 

Let's say the opposite happened? For a truck it would be an accident; for fuel it would be high rising diesel fuel prices! Have you ever seen fleet fuel prices high? From February 2007 to September 2007 diesel fuel prices increased 55 cents a gallon; from October 2007 to July 2008 diesel fuel prices increased $1.71 a gallon; from August 2008 to March 2009 prices fell by $1.40 per gallon; from March 2009 until March 2010 diesel fuel prices went up 95 cents. 

We do believe that since prices have moved down 30 cents a gallon for diesel fuel and crude oil has lost over 22%, now might be a good time to start talking about next steps.  All economic indicators in this country are strong and on the uptick. Yes, Europe is having issues and that, along with excess supply, has caused the oil market to fall.  But don't be fooled; diesel fuel prices are going to shoot up like the BP rig in the Gulf.  And once it starts on that upward trajectory, it might be hard to stop.