What Can You Buy for a Penny – of Fuel?

It’s the start of “driving season” and we’ve seen fuel prices rise.  This got me thinking about the affect on enterprise fleets so I contacted an industry expert, Jeff Sibio, Director of Industry Marketing at Intermec Technologies.  As shown below, even for a medium-sized fleet (approximately 500 vehicles), a one penny increase in fuel prices is profound, at about $31,000 annually.  For the nation’s largest fleets consisting of class 8 vehicles, each one penny increase can compound to millions of dollars.  These cost increases are changing investment decisions in areas like telematics and electric vehicles.

The good news is that the increased fuel costs bolster the business case for route planning solutions including applications and wireless devices. Route planning tends to deliver the largest fuel cost efficiencies because these solutions not only optimize routes by providing turn-by-turn instructions but also identify the least expensive fueling stations along routes.

In addition to reducing fuel consumption, another factor bolstering the telematics business case is the desire for a greener image.  According to a recent Frost & Sullivan report, the $80 million telematics market that existed in 2008 will grow to $700 million by 2015 due, in part, to growing pressure on fleet companies to reduce their carbon footprint and develop a greener image.  Having car-to-car and car-to-network communications could reduce fuel use and CO2 emissions by 10 percent, whether built into new cars or added to existing vehicles.

Also, according to a May, 2011 GE survey, Corporate fleet managers rated volatile fuel prices as their top concern for 2011.  The survey of 105 fleet managers found that driver safety and overall cost savings do matter. However, both are considered to be less of a concern than unstable fuel prices.  The survey showed that 29 percent of fleet managers use some sort of analytics to improve operational efficiency and reduce overall fuel consumption. Twenty seven percent of those surveyed claim that their analytical systems have slashed costs.  The volatile fuel prices are changing investment decisions beyond analytics and telematics.  28 percent of the surveyed fleet managers claim to have committed to purchasing electric vehicles to incorporate into their fleets within the next 12 months.

Simple fuel-saving practices that were ignored when fuel was around $2 per gallon are being implemented now that fuel is in the $4 range.  For example, many smaller fleets will no longer  let their trucks idle more than five minutes in any single spot.  Retailers such as furniture showrooms are increasing their home delivery charges.

Penny by penny, as fuel prices rise, we can expect to see increased investment in fuel-saving applications, devices, vehicles and the wireless services that connect them.

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