FBO Operations Tip: Managing Your FBO Fuel Prices in a Volatile Market
/No doubt you have noticed the increase in fuel prices. Since the beginning of year, Jet A has increased by more than 20 cents per gallon.
The impact on your FBO can be felt in cash outlay. For instance, if you recently purchased an 8500-gallon load of Jet A, you probably paid $1700 more than in early January.
If you haven’t been diligent about tracking fuel prices and adjusting your posted price along the way, a $1700 hit to the bottom line is substantial. What about increasing those contract prices that always seem to be too low?
If you follow the so-called experts, you’ll find there is no static answer or reasoning for oil prices rising and falling. For example:
- “Oil prices are likely to collapse later this year, Barclays forecasts” (CNBC, April 16, 2018)
- “US crude ticks up 9 cents, settling at $68.38, as market shakes off Trump’s attack on OPEC” (CNBC, April 20, 2018)
- “US crude hits 3-year high above $68 on report of falling stockpiles, global supply risks.” (Reuters, April 17, 2018)
- “A committee tasked with monitoring OPEC’s supply-cutting deal with other countries led by Russia meets in Saudi Arabia on Friday” (Reuters, April 17, 2018)
What is your strategy to manage fuel prices at your FBO? As we discuss in our NATA FBO Success Seminar, FBO managers should be proactive and always be looking ahead, actively tracking and charting fuel prices to get the most out of a volatile marketplace. We recommend conducting marketplace research on what is happening with FBO retail prices as well as the forecasts for wholesale fuel pricing.
You then will have solid facts and knowledge to adjust your margins to maintain a financially successful business.
You can easily post retail fuel prices on the internet. There are many internet apps, such as AirNav, Garmin, Foreflight, AC-U-KWIK, Fltplan.com and others.
You can compare your prices to other FBOs within your market as well as nationally. Business & Commercial Aviation publishes the results of ARGUS’s fuel price survey every month. Your fuel pricing strategy can keep you ahead of your competition.
For wholesale price changes, there are several sources for information. Of course, you can talk to your fuel wholesale supplier for data. Or you can start by reviewing crude oil prices on business news feeds. Another source is the IATA web site for the Jet Fuel Price Monitor: http://www.iata.org/publications/economics/fuel-monitor/Pages/index.aspx
The IATA site provides some very good statistics and discussion about Jet A fuel pricing for North America and worldwide markets.
As we look to the future, we stand by our forecast from February that was a part of our Annual FBO Fuel Sales Survey: “In the oil field, stronger than expected demand will push prices upwards in the first half of 2018. Crude Oil, currently hovering around $62 per barrel, will gradually increase to between $75 to $80 per barrel and then settle down to an average of $70 through the end of the year.” (ABSG, 2018 FBO Industry Forecast.)
Please leave a comment on this subject below. If you have any questions, please give us a call or send us an email: jenticknap@bellsouth.net, 404-867-5518; ronjacksongroup@gmail.com, 972-979-6566.
ABOUT THE BLOGGERS:
John Enticknap has more than 35 years of aviation fueling and FBO services industry experience and is an IS-BAH Accredited auditor. Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and customer service training. Visit the biography page or absggroup.com for more background.
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