I just paid the highest price for a fill-up in my life.
I’d gotten pretty used to the new normal. I even found a gem of a station nearby — consistently the lowest price around, generally fifty cents under anywhere else, holding near $4.00 a gallon for the last three months. Last week it had crept to $4.39. Yesterday it was $5.19.
So how does this land in my estimates? I’ve been thinking about it.
The fuel line doesn’t lie
When the volatility first started, I did what I always do: I went to the records. My monthly fuel expense over the past year was remarkably consistent — predictable to a degree that might surprise you. I looked at what was happening at the pump and predicted my monthly totals would rise about 30% over the next few months.
I was precisely correct. I’ve now got a couple of months settled at that level. If yesterday’s jump holds, does it go to 50%? More?
An increase like that is significant money on every job. I have no choice but to pass it on. But here’s the wrinkle that makes fuel different from most costs: the timing. I’m paying $5.19 today — but what will I be paying in three or four months, when the job I’m estimating this week actually starts?
What Wilma taught the crane companies
In 2005, Hurricane Wilma hit Broward County and the place was torn up for a good while. No electricity, fuel scarce, and the price at the pump shot from around $2.00 to $4.00 — a number we thought was outrageous at the time.
That’s when the crane companies instituted the fuel surcharge. And here’s the part worth noticing: when prices settled back down, the surcharge didn’t. It became accepted practice and never left. Today you see it everywhere in hauling, freight, and service work.
I haven’t rented a crane lately, but I have to wonder if they’re raising it right about now.
So why not us?
Here’s my honest question. Why is a fuel surcharge perfectly normal for the crane company, the hauler, and the freight line — and practically unheard of for the subcontractor who burns diesel in equipment and trucks every single working day?
It seems fully warranted to me. How else does an operator carry significant equipment and transportation costs against a fuel expense nobody can predict four months out? You can bake an allowance into the price and hope. You can write an escalation clause and negotiate it. Or you can do what the crane companies did twenty years ago and make it a line item everybody understands.
Whichever way you go, one thing I know for certain: you can’t do any of it on a feeling. The only reason I saw the 30% coming — and priced for it before it hit — is that my fuel history was sitting in my expense lines, waiting to be read. Same lesson as always: the numbers will tell you what’s happening, if you keep them and look.
So I’m asking the trade: is anybody out there running a fuel surcharge as a sub? Did your customers push back? I’d genuinely like to hear how it’s working.
— Dean Davids, Tailgate Technology