If you are looking to purchase wholesale diesel fuel, you have many options for purchasing this fuel. You can watch the market fluctuate and stock up when prices dip low, hoping you don't run out if they remain high. Or you can lock in a bulk diesel fuel price for a year and pay the same price each time you need your stock tanks filled up. There are pros and cons to riding out the market and buying at market prices or locking prices for the year. Learning these pros and cons will allow you to make a decision about which is better for you. Here are a couple of the pros and cons of locking in your bulk diesel fuel price for a year:
The Cons of Locking in Your Bulk Diesel Fuel Price for a Year
- You Can Lose Money if Fuel Prices Decrease
No one knows if fuel prices are going to go up or going to go down. If fuel prices end up going down, you can wind up losing money if you are locked into a bulk diesel fuel price for a year, also called a fixed-forward contract. For this reason, most experts recommend only locking in about 50 to 75 percent of your fuel needs for the year, allowing you to go to other sources if fuel drops.
- You Are Typically Locked into a Purchase Contract
The other disadvantage to locking in a fuel price for the year is that you typically lock yourself into a purchase contract. In order to get a specific rate, you often have to agree to purchase so many gallons of diesel fuel per month. But if sales at your gas station drop, you may have excess fuel or have to pay for fuel that you can't even have delivered because your storage tanks are full.
The Pros of Locking in Your Bulk Diesel Fuel Price for a Year
- You Know Exactly What Your Fuel Prices Will Be
The biggest benefit to locking in your bulk diesel fuel prices for a year is that you know exactly how much you will pay for the fuel delivery each and every week or month. This helps you to budget. There is no fluctuation in the price, which helps you to efficiently set a budget for your business and pay your bills.
- You Can Save a Lot of Money if Fuel Prices Increase
The other advantage to locking in a bulk diesel fuel price is that you can wind up saving a lot of money if the price of fuel increases. If you are locked into a bulk fuel price, you can help to keep your costs as low as possible for customers, which can help you retain or attract new ones.
When you lock in fuel prices for a year, you are gambling that diesel fuel prices will stay consistent or even increase. Sometimes you win this gamble and save money and other times you lose this gamble and lose money. But learning the pros and cons will help you decide if locking in a fuel price is right in your situation.
Contact a company like Gran-Del Petroleum Products for more information and assistance.