4 Ways Companies Can Get the Best Value When They Buy Petroleum Wholesale

buy petroleum wholesale

buy petroleum wholesale

Gasoline is the most widely used transportation fuel in the United States. In 2019, about 142 billion gallons of motor gasoline (approximately 390 million gallons per day) and 197 million gallons of aviation gasoline were used. This means fleet operators, distributors, and suppliers need a constant supply of the commodity, which is only possible by buying fuels in bulk. However, in the wake of the recent Covid-19 pandemic, fuel companies have incurred losses as gasoline prices have spiraled downward to an all-time low. The trend is likely to change as the pandemic abates. However, the slow economic recovery calls for fuel companies to adopt measures to protect them from such unprecedented price fluctuations. Here are strategies fuel companies can use to hedge against losses when they buy petroleum wholesale.

1. Sign a Fixed Contract

When buying wholesale fuels, you have the option of buying through a contract or on the spot. The latter means purchasing fuel from a supplier as the need arises without scheduled delivery and purchase parameters. As such, the company is exposed to the whims of price fluctuations. Conversely, you can’t wait until your oil tank runs dry to purchase fuel. You might end up making emergency purchases, which are often costly.

Signing a contract saves you all such inconveniences because you can lock in a fixed price and protect yourself from future price fluctuations. Another advantage of signing a contract is that it eliminates the uncertainties of the fuel market. You’re confident about having a supply of bulk fuels anytime.

2. Use the Spot Prices as a Basis for a Rack Transaction

If you buy petroleum wholesale from wholesale racks, keep an eye on the market’s spot price; it might save you tons of cash. This strategy is also known as an index deal, and it benefits fleet operators, retailers, or distributors whose purchase volumes have increased over the years and plan to expand. If the company has been buying from a large jobber distributor regularly, it can negotiate to purchase fuel on a spot basis instead of the posted rack price.

Unlike rack prices, spot prices are negotiated and fluctuate based on the volumes involved. If the refiner needs to replace lost production or overproduces wholesale fuel and wants to sell, they’ll do it at the spot price. The success of this strategy depends on a few factors:

  • Your insight into fuel market prices. Let your supplier know that you understand how index deals operate
  • Keep an eye on the daily fuel prices to identify the right time to enter an index deal, especially if there’s a significant plunge in oil prices
  • Analyze the relationship between the spot market and the local rack market. The differences change rapidly, so you want to keep updating that history every six months

3. Purchase a Call Option

This strategy is particularly useful for airlines as they are also affected by oil price fluctuations. They also buy petroleum wholesale and can reduce losses by purchasing the commodity at a specific price within a stipulated date range. The option gives the company the right to purchase oil at a specific price (agreed on today) in the future.

For example, if the current price of gasoline per barrel is $90 but the company speculates it might increase, it can purchase a call option for $6, giving it the right to purchase the oil for $100 within 120 days. If the price per barrel increases to $110 within that period, the company won’t incur losses.

4. Inquire About the Supplier’s Price Benchmark

Industry benchmarks like the Oil Price Information Service are the basis for most oil contracts. Basing contracts on such benchmarks also enhances price transparency and sensitivity to market trends. This way, you can determine if you are buying wholesale petroleum at fair market prices. Other industry benchmarks include NYMEX, PLATT, and EPEX SPOT.

You want to buy petroleum wholesale to get more bang for the buck. These four strategies should help negotiate better prices and enjoy the benefits of buying fuel in bulk. Be sure to keep tabs on the global and domestic fuel markets to identify the best time to strike such a deal.

Why U.S. Consumers Favor Gas-Powered Cars

The consensus is in. “Of the random 1,702 car-owning adults the Consumer Reports National Research Center contacted by telephone across the U.S., a massive 87% said they had some form of concern with plug-in cars,” Green Car Reports reveals. Consumer Reports’ survey reveals that the average consumer overwhelmingly prefers gas-powered cars, and there are several reasons why they wish to stick with them.

In the same survey, drivers expressed concerns about the safety of electric vehicles. Thirty-nine percent worry about their safety in general, while 35% said they feared electric vehicles catching fire after a crash. Nationwide, Americans prefer gas-powered vehicles and do not expect hybrid cars and electric vehicles to entirely take over the market. In fact, according to the American Automobile Association (AAA), just 40% believe there will be mostly electric cars on the roads in 2029.

Learn more about why the vast majority of Americans prefer wholesale petroleum or gas-powered vehicles and why it is likely to stay that way for the foreseeable future.

Hybrid Cars and Electric Vehicles Trend Smaller

In the U.S., the vast majority of consumers prefer larger vehicles. SUVS, vans, crossovers, and pickup trucks are among the most popular models. Americans choose larger vehicles for their storage capacity, their utility, and even to feel safer on the roads. “If you’re someone who likes to have some feeling of security, power, control, etc., then a large vehicle can provide that,” Newsweek explains. The same consumers who prefer larger vehicles are likely to stick with gas-powered vehicles now and in the future. Why?

For now, the overwhelming majority of hybrid vehicles and electric-powered vehicles are sedans. They are compact, four-door models without the space and heft of a much larger vehicle. If consumers want an SUV, they must purchase a gas-powered vehicle and fuel it with wholesale petroleum or fuel from the local gas station. There are a few exceptions, like Audi’s e-tron and Kia’s part-crossover, part-hatchback, the Kia Niro EV. Even so, the selection of mid-sized and larger, hybrid and electric vehicles remains severely limited.

Automakers Produce More Gas-Powered Vehicles

When drivers arrive on the lot of the dealership, one of the many things they are looking for is options. Consumers may have a few top makes and models in mind. Visiting the dealership and test driving vehicles can help narrow down their selection. For many people, this is a necessary step in the car-buying process. It is not one they are willing to skip.

However, a surprising number of dealerships do not even have one electric vehicle on the lot. That means, in order to test drive one, drivers will have to wait for their salesperson to put in a special request. What’s more, if the driver does not like that particular electric vehicle, there may not be any others to compare it to — at least not without putting in yet another special request to test drive that particular model.

Gas-Powered Vehicles Are Most Convenient

Will gas-powered vehicles, wholesale petroleum distributors, and stopping at the gas station soon be a thing of the past? Consumer attitudes, customer surveys, and auto manufacturers all make it clear that the answer is no.

Right now, wholesale fuel distributors sell wholesale petroleum and diesel to gas stations, who then sell it to consumers. The practice is tried and true. Consumers know what to expect when they purchase a tank of gas, and they know their options when they need to refuel.

Plus, people know what to expect from long trips and roughly how often they will have to stop for gas along the way. When it comes to hybrids and electric vehicles, however, most consumers do not readily have these answers on hand. There is still a lot of confusion about how and where to charge these vehicles, particularly among drivers who take long trips and/or those who cannot afford or accommodate at-home charging stations.

Right now and for the foreseeable future, gas-powered cars, wholesale petroleum providers, and gas stations in the U.S. are going strong. Modern drivers prefer the convenience and availability of traditional vehicles, and that trend is likely to continue.