- Product prices are becoming wildly dynamic as costs continue to add up, so retailers are looking at how much of a threat this is to their business.
- “Diesel will continue to see high prices through the end of the year.”
- To get an idea of where prices are headed, you can also look at the EIA’s national average forecast, though nothing is guaranteed.
Rising inflation and supply chain issues continue to throw a curveball at businesses and consumers alike. With so much confusion and uncertainty about the future, it can be difficult to plan ahead and keep business running smoothly. Amongst this confusion hits one of the most vulnerable areas for wholesalers: fuel forecasting.
Some of the world’s most reputable retailers, like Walmart, rely on fuel forecasting to enable efficient, agile supply chain strategies. The bottom line is conflicting macro trends and the rise of diesel costs and supply and demand for oil is running a tight margin in effect to inflation, recession, and consumer spending — all providing the conflicting signals discussed above.
How the Current Economy Has Changed Fuel Forecasting
“We have become more acquainted with fuel forecasting this year because of the very high energy price environment, not just with diesel, but other types of energy as well that has made us focus on costs such as natural gas,” Matt Muenster, Chief Economist at Breakthrough, said. “Businesses rely on this for setting their budgets, and in the simplest of terms, they need to account for transportation costs in the goods they are bringing to the market.”
What has been especially challenging for consumers with all of these price hikes is that while normally there is a slight difference in price over a few years time, this year shoppers have seen an increased cost of goods across the board at a more rapid rate. Product prices are becoming wildly dynamic as costs continue to add up, so retailers are looking at how much of a threat this is to their business and how capable they are of passing the increased costs down to consumers.
Fuel Forecasting Will Continue to be Essential During the Holidays
Muenster says that supply chain and fuel forecasting issues will persist all through the holiday season. Depending on how busy of a freight season it will be, and with an increased demand in heating as temperatures go down, this will all put pressure on diesel inventories. Looking over the last five years, nothing is suggesting that diesel supplies will grow, so the price pressure on businesses with transportation and energy spend will persist.
“We encourage any businesses who are involved, if your spending is being impacted by high diesel costs, keep your budget tight as we work through the end of 2022 and into 2023. There is a lot that could happen, such as an unexpected sharp downturn maybe as a sequence of inflation, but diesel will continue to see high prices through the end of the year,” Muenster said.
How Businesses Can Regain Control of Fuel Forecasting
Amidst all of these challenges, how can wholesalers make actionable changes to regain control of their fuel forecasting strategy? Here are some tips:
1. Capture Clean and Actionable Data
According to Muenster, wholesalers need to have insight into where their freight is moving and how often it is moving. Depending on where the freight is geographically, it can account for a higher diesel price in certain areas. Having that data clarity helps to better understand what opportunities might exist to decrease your fuel and energy costs.
2. Create Your Average Budget
Once you can see where and how often your freight is traveling, estimate how many gallons of diesel it may cost, and create a rough budget. To ensure you are giving your team enough wiggle room, especially with the inability to properly forecast how high the prices can jump, add a buffer of a few extra dollars to ensure you do not regularly go over your budget.
3. Create Your Fuel Forecast
To get an idea of where prices are headed, you can also look at the EIA’s national average forecast, though nothing is guaranteed. You should also be aware of regional differences when looking at these predictions, and you can use the historical data to estimate the differences between the national average and your specific routes. In general, prices rise over the summer and during holidays, so take these changes into account while creating your budget, according to P-Fleet.
The reality is that fuel forecasting is more difficult right now due to inflation and supply chain challenges, but it is still a crucial part of running your business, as it can help you to save money wherever possible. The less planning ahead that you do, the more you put your business at risk for loss.