Issue link: https://read.dmtmag.com/i/138965
76 • JULY 2013 • WORLD FENCE NEWS Every time the price of oil drops, I get asked why the price at the pump stays high. With 12 years in the fuel business, it seems I'm always being asked "aren't the two linked?" The short answer is yes, they are definitely linked, but as you guessed there is a longer answer. When oil prices skyrocketed earlier this year, the pump prices kept pace. Now that the barrel price has come down, the pump price is falling too, but slowly. You might call it a controlled descent and there are several reasons for it. Fuel prices are affected by a number of things; the price of oil is just one. Fuel is a retail product just like thousands of other things we need from day to day. But unlike other retail products, fuel is also a commodity, so supply and demand determine the price on the open market and ultimately at the pump. Also, unlike retail products, oil is used in many applications – not just as a fuel but also as raw material in manufacturing myriad goods, chemicals, foods, fertilizers, etc. While supply is abundant and demand consistent, prices are stable. But when supply is disrupted, short-term inventory is threatened and this affects millions of Ask the Fuel Expert If oil's down, why is gas still high? BY JACK LEE , CEO , 4REFUEL , INC . businesses worldwide. We quickly see demand surge and prices spike. And there are so many things that can interfere with supply. A few years back, an almost nation-wide Canadian fuel shortage was triggered by a fire in a refinery in Ontario and it became a perfect storm. It was an unusually cold winter and when one of three refineries went off-line, a fuel crisis began. Fuel normally brought by rail from Quebec was held up by a strike at the railway. Fuel normally brought by ship from Michigan was blocked by thick ice in the ports. Soon, commercial filling stations ran out of diesel and businesses weren't able to operate. Needless to say, fuel was expensive if you could get it, and even after supply returned, it was months before inventory was restored and prices came back down. But there's more to oil prices than bad luck and worse weather. A huge part of the rise and fall in world oil prices is market forces – and this is where it gets a little compli- cated. There's oil in everything. And by that I mean there's very little in our lives that doesn't require oil to produce it, bring it to market, take it home or put it on the table. That's why oil prices are also affected by indicators like consumer confidence and employment rates. Fuel is a retail product just like thousands of other things we need from day to day. But unlike other retail products, fuel is also a commodity, so supply and demand determine the price on the open market and ultimately at the pump. Also, since oil is global, prices here are affected by demand elsewhere. We have seen oil consumption in China and India rival that of the United States, and suddenly oil prices were rising even when U.S. consumption was falling. Commodity markets were trading oil just like gold, foreign currencies and stocks. Now, with the turmoil in the stock markets and world oil consumption beginning to somewhat stabilize, oil is holding its value because of another distinct advantage oil has – control of supply. Like diamonds and gold, if market prices fall too far, supply can be reduced until the price goes back up. All of this means that we should get used to high oil prices – but it doesn't mean there's nothing you can do. Learn these two words: Fuel Management. Fuel Management is a concept whose time has come. It is the idea that if you collect accurate data on how you use fuel that you'll be better able to control consumption, reduce cost and eliminate theft and waste. As a concept, it's not an entirely new one, and there are a number of fuel management companies that offer solutions of varying effectiveness. The most basic systems comprise manual data collection and spreadsheets. The program relies on the consistency of drivers recording their daily odometer readings and fuel purchases, as well as the accuracy of the data entry person and the commitment of the manager to make sense of all the information and decide how to use it. SPREAD THE (WORLD FENCE) NEWS! Bosses, encourage your employees and clients to keep up with the latest news from the fence world by reading World Fence News OnLine each month, and now, The Fencer's Almanac! There is no charge to access this site, and it's a great way for everyone connected to your firm to stay in the loop, especially if you have ads or editorials running. All ads and editorials that are contained in the regular printed edition of World Fence News are available in digital format at www.worldfencenews.com (click on the image of the current issue) If you have any questions regarding the printed or OnLine editions of World Fence News, contact Rick Henderson at 800-231-0275 or e-mail editor@worldfencenews.com. continued on page 78