2012 2013 Fuel Freeze Sales Presentation Revised
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Transcript of 2012 2013 Fuel Freeze Sales Presentation Revised
Welcome!
Why are we here?
Fuel and/or Gas represents a top four cost yet most companies lack a strategic resource to budget effectively.
How can I control my cost?How can I maximize my opportunity to save?
Price Origination
All fuel enters the wholesale market at the “Rack”.Rack pricing is linked to NYMEX tradingThe price of every gallon in the Chicago market
has the same point of origination.Since all prices are linked to NYMEX contracts, we
can secure a future price thru buying contracts.
Vancouver
Anacortes
Billings
Casper
SaltLakeCity
Guernsey
Minneapolis
Chicago
New York
Cushing
HoustonBeaumont
WoodRiver
LOOP
Patoka
Major Product Pipelines
Typical Annual Price Curve
Janu
ary
Febru
ary
Mar
chApr
ilM
ayJu
ne July
Augus
t
Septe
mbe
r
Oct
ober
Novem
ber
Decem
ber
$3.25
$3.50
$3.75
$4.00
$4.25
What shapes the curve
Supply/DemandSummer Gas- 28 different formulationsInfrastructure limitationsApril 1st Construction-Farming- Driving etc…
Change our Thinking
Proactive Energy Management Can I buy at the cheapest price for this year? Initiate Cost Control Measures
Implement strategies that positively affect your fuel spend Capitalize on historical price trends that reoccur each year. Use the same strategies as Southwest, just a smaller playing field. Budget fuel expenditures with accuracy
Gas Price origination
Janu
ary
Febru
ary
Mar
chApr
ilM
ayJu
ne July
Augus
t
Septe
mbe
r
Oct
ober
Novem
ber
Decem
ber
$3.25
$3.50
$3.75
$4.00
$4.25 Not Here
Change How you Buy Fuel!
Buy Here
Our solution
Lock in a portion of your expected fuel purchases before normal inflationary factors kick in.
Based on historical trends, fuel will be cheapest in the first quarter and increase from there.
You are not purchasing in advance or pre-paying.Customer agrees to buy x gallons at $x.xx price at
a particular month in the future.
Fuel Freeze- Step 1
Identify your expected purchases for each monthShow March 2012 thru Feb 2013Use previous year and adjust for budget and new
business forecast.Identify seasonal variations.
Fuel Freeze- Step 2
Reduce each of these numbers by 50%Feb 10, 2012- Lock in pricing for that 50%Each month is a separate buying period, no
rollover. Accuracy is important.Deliveries of locked 50% made first each monthBudget that number, plus 10%, into your jobs and
equipment rate
Fuel Freeze- Step 3
Fuel goes up- you see return on protected gallonsFuel goes down, your unprotected gallons become
the hedge.If it drops more, you can lock in another 25%.Once you lock in, any decrease is a buying
opportunity.Your jobs still pay the rate you locked inDon’t be a Monday morning quarterback!
Important Dates
Jan 27, 2012- Mock Pricing #1Feb 3, 2012- Mock Pricing #2Feb 10, 2012- Lock in Date Contract executed on Feb 10th.
No minimums No upfront cash requirements Customer has complete flexibility in what to lock in.
Sample Price Quote
2/7/2011
2011 Delivered Rate
March Diesel 3.50 Gas 3.13
April Diesel 3.59 Gas 3.18
May Diesel 3.65 Gas 3.24
June Diesel 3.68 Gas 3.26
July Diesel 3.68 Gas 3.31
August Diesel 3.71 Gas 3.31
September Diesel 3.74 Gas 3.38
October Diesel 3.75 Gas 3.40
November Diesel 3.78 Gas 3.38
December Diesel 3.76 Gas 3.31
January Diesel 3.78 Gas 3.33
February Diesel 3.81 Gas 3.35
POC Requirements
Monthly Admin Fee based on volumes10 Day ACH on gallons locked in30 Day ACH on all other purchasesSigned contract
How has our strategy performed?
$0.00$0.50$1.00$1.50$2.00$2.50$3.00$3.50$4.00
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Avg Annual Price Hedge Price
Historical Hedge Price versus Average Market Price: 1994-2009
Hedge Price represents locked fuel prices bought in Jan/Feb
Our strategy has significantly outperformed the market!
Financial Impact
ABC Corporation who bought 200,000 gals per year under this method for the years listed would have saved $828,000 or .23 cents per gallon.
In the years 2004-2011, that savings climbs to $640,000 or .40 cents per gallon.
Price volatility has grown considerably over the last five years and could continue to grow.
What’s Driving Volatility
Economic Forces Supply & Demand Refining capability Speculation Currency Valuation Middle East unrest Weather Geo-Political Exploration
Bottom Line
It is not a question of “should I buy under this
method” but instead it’s a question of “How Much
should I buy under this method”
What are the results?
Past performance is no guarantee of future results.In three years, our customers on the Fuel Freeze
program have saved over $2 million combined.Most returning customers say the savings is great,
but the greatest benefits are:1. Don’t have to worry about paying for increases.
2. Can concentrate on running our own business.
3. I can finally budget for fuel!
Palatine Oil Fuel Freeze Program-List of References
1). JA Frate Joe Alger President 815-459-0839 2). Illinois Central School Bus Bruce Barr Senior Contract Manager 815-416-1110 3). Rolling Meadows Park District Bob Hartnett Public Works 847-963-0500 4). Peapod Bob Kruse Senior Transportation Manager 847-307-8710 5). Acres Enterprises Jim Schwantz President 847-487-3000
Questions?
Please leave your contact info including e-mail.Materials will be e-mailed out to participants.
Thank You!