Expected Fuel Cost Increases and How They Impact You

We’ve recently discussed the rise in freight and plastic resin costs, but now let’s talk about another factor affecting your bottom line — fuel. Rising fuel costs are never good news for portable restroom operators. In the short term, it makes every delivery or scheduled cleaning more costly, whereas extended periods of high gas prices can lead to increases in your costs of goods.

However, as a natural resource prone to price fluctuations, inevitably, what goes down always comes back up. So, what’s in store for gas prices this year? And more importantly, what can PROs do to minimize the impact of higher fuel costs? The bad news is that prices won’t decrease anytime soon. But, there are steps you can take now to protect your profit margin.

What’s Behind the Rising Gas Prices?

Gasoline demand plunged in 2020, resulting in the lowest national average in over four years. Of course, the lower demand led to a decrease in oil production. The oil industry didn’t increase production even when weather and COVID-related refinery shutdowns reduced the supply.

As more people get vaccinated, economic professionals believe consumers will travel and buy more products and services, increasing demand. Higher usage combined with rising crude oil prices, retail distribution and marketing costs, and refining costs could further increase. Although S&P Global Platts reports that OPEC will add “more than two million barrels per day into the market by July,” it may not be enough to prevent rising prices.

How Much Will Fuel Costs Increase?

The U.S. Energy Information Administration (EIA) “forecasts U.S. regular gasoline retail prices will average $2.78 per gallon” for the summer driving season of April through September and an average of $2.66 for 2021. However, this figure is expected to drop to $2.59 in 2022.

Typically, gas prices increase during summer months due, in part, to the switch to more expensive summertime gasoline blends. According to NACS, this can increase costs by up to $0.15 per gallon.

Even though the U.S. federal government hasn’t increased fuel taxes since 1993, the president and transportation secretary have made it clear that they don’t intend to raise federal taxes or create a new vehicle miles traveled (VMT) fee to pay for infrastructure improvements. But, several states, including Louisiana and North Dakota, are considering state increases.

Fortunately, no one predicts the all-time high for all gas formulations experienced on July 7, 2008, where prices rose to $4.11 per gallon.

Reducing the Impact of Higher Gas Expenses

Few businesses involving travel benefit from higher fuel costs. However, other industries, such as manufacturers, can pass these increases onto retailers, who then raise prices for goods. In the service industry, it’s not quite as simple. Instead, PROs may consider:

• Limiting their target service regions or adding a surcharge for longer distances
• Using routing software to optimize routes for deliveries and services
• Leveraging GPS fleet-tracking tools to assess vehicle speed and idle times
• Prioritizing fleet maintenance based on mileage, date, or engine alerts

Address Challenges by Being Proactive

While fuel hikes aren’t a surprise, it’s still an extra hurdle to face in an already challenging economy. By thinking ahead, updating your routing tools, and speaking with drivers, you can lessen the effect of higher costs on your portable restroom business.

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