Fuel Prices are Pumping Up!   If you read last month feature article we talked about all of the negative things that were happening that we believe will cause fleet fuel prices to go up throughout the rest of the year.  In our intro within this newsletter we also talk about strong economy, construction increases and upward movement in manufacturing.  Talking to our clients is part of the personal service, hands on touch that we provide at Sokolis Group.  I can tell you that most of our clients and other companies we have had conversations with have seen an upturn in demand.  More miles, more fleet fuel and a great demand.    Let's take a look at what has been going on with fuel.  When I was writing this article, crude was over $85 a barrel. Diesel fuel prices were at their highest levels since November 2008. OPEC is still playing around about any further increases in production.  They will increase fuel production but in will come a few months to late.  OPEC's view is better to be late and make more money than early and not cash in.  Remember for most of these countries oil is their economy.    The EIA is still holding to their $81 a barrel prediction for crude the rest of this year.  I don't know if you recall but their track record in recent years for pricing has not been very good.  I have more confidence in companies like Morgan Stanley who seem to be more in tune then the government.  The government still plays 8 track tapes compared to Morgan's view of the latest IPod.  Oh, I forgot to mention that the outward months for trading of crude oil are in the high $80's so that market believes it's going to be higher.   At least 3 additional weather forecast medias have said that it will be a bad year for hurricanes.  With the weather we have had over the last 5 months in the Northeast and other parts of the country, nothing really surprises me on that end.  What I do know is our country's fuel infrastructure is not what it used to be.  I heard an economist talk a few weeks ago and he explained away that we don't need the refineries we once had because of technology.  What he failed to explain to the crowd was if you have 300 refineries and 1 goes down with issues or turnaround which happens twice a year, not that big of deal.  When you have the same number of gallons being produced now by less than 150 refineries, when one goes down, it puts a real strain on the system.   Now, let's look at some of the other things being thrown at diesel fuel prices.  How about state mandates for bio fuel?  Easy if you have the bio fuel right in your backyard, not so easy if you have to put it on a railcar and have to ship it.  Let's not forget that for the past 4 months there has been no blenders credit of a dollar for bio fuels, so that has caused the industry to stall.  That industry is just at its beginning hopefully if it survives, starts and stops don't help the overall production of the product.  No, $1.00 tax credit that usually gets at least mostly passed down to the end user of Bio is not getting that now which also has caused fleet fuel prices to increase.    I am not here to predict gloom and doom about diesel fuel prices but I do believe we will have crude awaking during the rest of this year and next.  Higher crude oil prices mean higher diesel fuel prices and certainly higher gas prices, so none of that is good for any of us but the facts are the facts.  I don't know if you have to run out and by fuel insurance/hedges because the outward months are high.   If you're not a client here are my elevator facts to you why you should be a client:   Oil is trading at a 18 month high just under $85 a barrel Refinery utilization is at 80% compared to 2008 when it was at 90% and diesel fuel was $4.76 7% of all fuel invoice have a mistakes March 2009 to March 2010 diesel fuel prices increased 96 cents Experts are predicting 18 named storms during hurricane season this year OPEC just met and showed no signs of increasing production Oil is traded on the NYMEX in U.S. Dollar, the dollar is not in a strong position and looks to get weaker as we borrow more money to fund health care and other projects, this means it cheaper for other country's to buy oil  2% of your diesel fuel budget goes to theft, 4% of your gas budget goes to theft, most of it is internal (your people stealing from you) Speculators like to trade hard when the U.S. Dollar is week as a natural hedge against inflation, this happened in 2008, when oil prices went to $147 a barrel China's reported April 1 that their economy is growing it's fastest since 2004.  They will need more oil to handle that demand DEF and Bio Fuel will change your fuel buying, do you have time to keep up Over the last year according to the DOE, 2 refineries have shut down and several smaller plants have been idled, it would take a period of time to bring them back up Morgan Stanley projects close to $100 a barrel by the end of the year U.S. economy is recovering which will increase demand for diesel fuel Sorry I talked fast but I knew I was only going up 1 floor.  If the elevator ride was going up more floors for me, I would have more to explain why fuel and the elevator were going up and you needed us more than ever. Enjoy your day.  Watch your step, time to go create some more money saving fuel strategies for our clients, before it's too late.

In fleet fueling there are many ways your employees can steal fuel from you.  Most companies truly believe, it can't happen to me.  There theory is we have someone that spot checks that information sometimes.  Our drivers make good money they would never risk losing their jobs.  Why would anyone want to steal from us, we take care of our employees.  When it comes to fleet fuel the fuel is liquid cash when it comes to stealing.  Everyone would like to believe they know their employees well enough to think that person won't steal but it happen.
 
Below is an article from the Baltimore Sun.  The article is in black print, comments from the Sokolis Group are in red print. 
 
Theft of city fuel admitted
Public works driver resold more than 100,000 gallons of diesel

By Robbie Whelan Baltimore Sun reporter
April 1, 2010
A former Baltimore public works employee has pleaded guilty to stealing more than 100,000 gallons of diesel fuel from the city and reselling it as part of a scheme that went unnoticed for a year and a half. (I can assure you that if they had a good fuel inventory control process in place this would have been caught within 2 months.)

Maurice Boone, 45, was found out Jan. 5, 2009, by a Baltimore County police officer who saw Boone filling several 250-gallon storage tanks with city-purchased diesel at a warehouse on Sparrows Point Road. The officer observed Boone while investigating a car-theft ring.

According to court records, Boone told police and an investigator from the city inspector general's office that the plot had been going on since 2007. The tractor-trailer operator would fill a city tanker from a pump at a landfill on Quarantine Road; make several rounds filling city vehicles as part of his job, then sell the remaining fuel for $1 a gallon to an associate named Jimmy, who would leave money for him at the warehouse rendezvous point. The associate was identified in court documents as James Wright, who is a co-defendant in the case. (At this point in time diesel fuel was selling for over $4.00 a gallon at retail locations.  I believe they were selling the fleet fuel for more like $2.00 a gallon.)

Boone pleaded guilty Monday and will receive a suspended eight-year sentence and five years' probation, records show. He must also pay the city $187,000 in restitution, but Baltimore Circuit Judge Lynn K. Stewart delayed sentencing until July, a month after Wright's scheduled trial. (The Sokolis Group has nothing against Mr. Boone except you won't find us hiring him what we are confused about is 100,000 gallons at even $2.00 a gallon is over $200,000.  The average price per gallon this fleet fuel over this time period had to be close to $3.00.)

Boone's lawyer, Marc Minkove, said his client - who was fired from his city job in March 2009 - will testify against Wright "if he's summoned."

A charging document pegs the total amount of diesel that Boone stole at 101,305.4 gallons, but public works officials said they weren't sure of the precise number. A spokesperson for the state's attorney's office said that the losses may have totaled as much as $1 million, but that prosecutors were unable to document the extent of the theft because of insufficient paperwork. (If public works officials don't know what the amount is like they say they don't, it is much higher than 101,305.4.  How did they come up with the .4?  They say the extent may have been close to $1 million so even at $3.00 a gallon for diesel fuel like we said above that would be a theft of at least 333,333 gallons.  As a fuel management company, we would believe that number of 333,333 is more like the real number of fleet fuel stolen.  As a fuel manager someone should have had some fuel inventory records to catch this amount of fleet fuel leaving the fuel tanks.)

"From our end, we never knew how much fuel the guy was actually stealing," said Robert Murrow, a DPW spokesman.

Murrow added that fuel prices were rising, so the agency did not notice the high cost of diesel invoices being charged to its office. (Sokolis Group agrees fleet fuel prices were rising but that has nothing to do with your fuel inventory and fuel management.  Fuel inventory is just like any other inventory, goods come in and goods go out.  If you have 500 gallons of fleet fuel delivered, you need to know which vehicles your fleet fuel went.  If it only comes out to 450 gallons of fleet fuel and you don't have 50 gallons of fuel still left in the fuel tank, you have a problem.  The fleet fuel pricing going higher is a matter of fuel auditing to make sure you paid the correct fuel price for what you bought.  Most fuel managers at companies since that job is just part of many jobs don't do a very good job at it because they don't have access to the proper data to be able to understand the fuel market trends.)

Diesel hit a historic high of $4.76 per gallon the week of July 14, 2008, before dropping to $2.01 six months later, according to Department of Energy statistics. 
 
The City should be ashamed of this.  When there are fuel management companies out there that can manage all of your fleet fuel buying, fuel auditing, and fleet fuel pricing and checking for a whole lot less than $1 million dollars.  For a couple of thousand dollars of month they could have been well service in fuel management by Sokolis Group or some other fleet fuel management company.  Who knows who else is or was stealing fleet fuel from them?  They don't track their fuel inventory, so it could be millions of gallons of diesel fuel that has been stolen.  Maybe before Boone started to steal fleet fuel from them there was someone else that told Boone how to do it.  Do you have someone stealing fleet fuel from you?  Are you sure?  Do you have solid fuel inventory records? How about the prices of fleet fuel are you paying what you should be or are your fuel prices higher than they should be? Do you know?