Gas prices saving bank for fleet owners

For companies and organizations that operate fleets of vehicles, 2015 is producing real savings at the pump. While gas and diesel prices change daily, those who frequent area fueling stations have paid around $1 less per gallon this year compared to 2014.

For a pair of local trucking businesses, fuel savings are estimated at over $20 million combined, and for a local health care provider, fuel expenses are down by around $350,000.

Between ambulances, shuttles and equipment transport vans, CoxHealth manages a fleet of 247 vehicles in the immediate Springfield area – not including those working out of Branson, Monett or Oxford HealthCare. In fiscal 2015, which started Oct. 1, the organization has saved just under $210,000 through the end of June, according to spokeswoman Michelle Leroux.

October through June, CoxHealth spent over $482,000 for fuel locally, a 30 percent drop from fiscal 2014 when the organization dolled out over $692,000. In addition, CoxHealth has saved over $140,000 for fuel reimbursements to employees using their own vehicles.

Mike Dawson, emergency medical services operations manager for CoxHealth, said while fuel savings are nice, his primary concern is that the health care provider’s local ambulance fleet of 47 can reach the people it needs to in a timely manner.

“It’s almost impossible to budget for fuel,” Dawson said. “We have to do the best thing for our patients.”

That often means using fuel in idling emergency vehicles strategically stationed around town and ready to respond. Dawson said his fleet averages 7 to 9 miles per gallon, but beginning this year, CoxHealth is investing in newer ambulances he believes could average more than 17 miles per gallon.

But fuel savings wasn’t a primary driver, he said.

“It was a nice dividend,” he said of the Mercedes-Benz Sprinters purchased for their forward-facing seats that make it easier and safer for emergency personnel to work on patients.

For three years between the springs of 2011 and 2014, retail diesel gas prices hovered around $4 per gallon, according to the U.S. Energy Information Administration.

Prices slowly declined to around $3.60 per gallon on Dec. 1, before falling to around $2.85 per gallon in February. The week of July 27, the average retail cost was $2.72 per gallon. That compares to $3.86 per gallon the same week last year.  

Verna Bailey, fuel manager for Springfield-based Prime Inc., estimates the company’s drivers use between 110 million and 120 million gallons of diesel a year.

However, she said about two-thirds of its 6,000-truck fleet is owned by owner/operators. Thanks to a long-established fuel surcharge program, she said the drivers and customers themselves see the biggest benefit to falling gas prices.

According to a Springfield Business Journal estimate, the lower cost of diesel in 2015 puts year-to-date fuel-expense savings on company vehicles at around $20 million, but Bailey said that estimate doesn’t mean Prime has added $20 million to its bottom line. She said most of that savings goes to independent contractors, fuel, safety and service bonuses.

The big picture: when gas is high, customers and drivers pay more; when it is low, they keep more.

“The supply chain marches on,” Bailey said. “Wal-Mart is going to have to stock its shelves regardless of the cost of diesel. General Mills is going to make cereal regardless of the cost of diesel. It may cost more to ship it when the cost is high, or it may cost less when the price is low, but the cost is not going to stop it.”

Jim Towery, president and owner of Steelman Transportation in Springfield, said its 120-truck fleet is entirely run by drivers who are owner/operators. He estimated his drivers have saved around $877,000 so far this year compared to 2014.

Steelman Transportation has a fuel surcharge of its own – which like Prime Inc. begins to kick in at $1.20 per gallon – in place since 2002, Towery said.

Running flat beds, or open-deck trailers, Steelman Transportation serves the needs of a range of local manufacturers including Paul Mueller Co. (OTC: MUEL), Loren Cook Co. and Siemens across 48 states.

“Before the surcharge, when fuel would go up, we’d have to absorb that cost,” Towery said, adding 2002 was a year when many firms in the transportation industry began to implement the charges.

“By 2003, 2004, I’d say every one of our customers was on a fuel surcharge formula of some sort.”

He said an industry standard in efficiency is 6 miles per gallon, and the surcharge – which changes weekly based on retail prices – is designed to ensure trucks that meet that standard have their gas paid for.  

“An owner/operator who gets 6 mpg breaks even,” he said.

If he or she is more efficient, they can come out ahead. If they are less efficient, they will lose more and more money as gas prices rise.

“The name of the game is to try and beat the formula.”

David Mitchell, director of the Bureau of Economic Research at Missouri State University, said – depending on the industry and what competitors are doing – this year’s fuel savings benefit a range of people and businesses.

“It’s like putting money back into people’s pockets,” Mitchell said. “It could come back to consumers in the form of lower prices or prices not necessarily going down, but not going up as fast as they would have. Or it could come in the form of wage increases for employees or increased profits for shareholders.”

For companies with fleet vehicles, the savings are direct, but for others such as fast-food companies or retailers, savings aren’t as obvious.

“Lots of their purchases can be impulse purchases. With people spending less on gas, they have, in essence, a few more dollars in their pockets and could go to McDonald’s to get that hamburger with a milkshake,” Mitchell said.  

However, he said as prices stabilize, the impact wears off.

“I think the biggest effect was when it was first starting to occur,” Mitchell said, pointing to large jumps earlier this year in Arvest Banks’ Consumer Confidence Survey, which he helps manage.

“The effect kind of wears off over time. It’s the same thing when gas prices go up. It impacts people. You’ll hear a lot about it in the press and a lot of negativity walking around on the street, but then they kind of get used to it.”

At Steelman, even though company drivers are saving hundreds of thousands on gas, Towery estimated gross revenue would be down 5 to 6 percent in 2015. Less surcharge revenue means less revenue, even if its pass-through dollars.

And industry headwinds are eating profits too, he said.

“2015 is a tough year. Fleets have grown about 4 percent nationwide, and freight has been soft,” he said.