For business operators needing to make decisions and plan for the future, the current complexity and volatility of the commercial fuel market has been the cause of some serious headaches in recent weeks.
The price fluctuations of fuel throughout 2020 can be attributed to a variety of outside factors, particularly the Covid-19 pandemic which seized the globe from early this year. January saw the price of US fuel at $67, before it experienced the usual decline due to reduced seasonal demand.
The impact of Covid-19 cases on fuel prices was seen early on. In February, growing concern over the virus’ impact on fuel demand nationwide saw an uplift in fuel prices, surprising many investors.
This recovery was short lived however, as March bought a ‘perfect storm’ for the global fuel market. Not only was Covid-19 beginning to take full effect, generating further concerns about the affect this would have on supply but there was also a supply battle between Saudi Arabia and Russia. As both nations were producing excessive fuel supplies, this created a downward pressure on the price of oil and further concern for global investors.
In the UK, March’s nationwide lockdown had a significant impact on the volume of fuel consumption, with many businesses having fuel volumes halved. This was particularly obvious in the car and van industries contributing to a downward pressure in the industry. However, the need for key supplies in all stores mean that the truck market was less affected by lockdown.
The lockdown in the UK was one of several, however. India, the third largest oil consumer in the world was also locked down, which had a significant impact on the downward pressure the industry was already experiencing.
However, since the initial lockdown, fuel prices have shown some signs of recovery. This has been helped by reductions in production levels in May and June. Since July, the production of oil has also started to slow, as well as more positive economic data coming from the US, China, and Europe which has helped to support pricing.
While it is difficult to predict what will happen to the price of fuel long-term, currently the industry is showing signs of recovery and at present traders expect a gradual increase in demand which in turn will drive a small increase in price.
Experts in the fleet industry are advising operators to stay close to the market. Fleet managers are advised to manage consumption within their fleet closely by ensuring that fuelcard providers and businesses are set up to see what vehicles are using and drivers are spending.