5 Ways Contractors Can Reduce the Impact of High Fuel Prices
Fuel is essential to almost every construction process. As a result, fast-rising fuel prices are cutting into contractors’ profits.
Experts say that fuel prices are likely to keep rising even as oil prices start to fall. Contractors wanting to keep their businesses profitable will need new strategies to combat rising fuel prices.
These are some of the best strategies that contractors are using right now to reduce fuel consumption and find better deals on fuel.
1. Invest in Fleet Management Software
How fleet vehicles and heavy construction equipment are used or maintained can have a significant impact on their fuel efficiency. Harsh driving, speeding, idling, and poor maintenance practices can all reduce the fuel economy of a truck or piece of construction equipment.
With fleet management software, contractors can identify how employees and subcontractors are using their fleet equipment. Combined with the right telematics solution, these software tools
can track and flag behaviors that make equipment less fuel-efficient.
These tools can also automatically notify managers or supervisors, allowing them to take quick action to stop the behavior and prevent it from happening in the future. Along with other digital construction tools, fleet management software can make tracking, directing, and scheduling fleet vehicle use much easier, as well.
Fleet management software can also make it easier to track equipment maintenance. Well-maintained fleets tend to be more fuel-efficient because everything from tire inflation to the freshness of engine oil can have an impact on equipment fuel consumption. By monitoring and scheduling equipment maintenance with the right tool, contractors can maximize their fleet’s fuel efficiency, helping to reduce fuel costs.
2. Upgrade to High-Efficiency Vehicles
The growing market of high-efficiency vehicles and construction equipment can help contractors reduce fuel expenses. By choosing a high-fuel-efficiency machine when upgrading equipment, contractors can potentially cut down the amount of fuel they need for construction processes.
Contractors can also consider adopting hybrid or alternative-fuel vehicles. These vehicles either take advantage of electric propulsion systems or alternative fuels, like biodiesel. In addition to reducing fleet emissions, these vehicles can significantly reduce a contractor’s fuel expenses.
Alternative fuels, like biodiesel and renewable diesel, tend to be cheaper than conventional diesel. For example, “the national average price of B-20 biodiesel blends in July 2021 was $3.05 per gallon compared to $3.26 per gallon for diesel fuel,” according to the Alternative Fuels Data Center.
By upgrading to vehicles or equipment that use these alternative fuels, contractors may be able to reduce their overall fuel expenses while also making their business more sustainable – a potential selling point for environmentally focused clients.
3. Rent Rather Than Buy Fleet Vehicles
Owning a fleet vehicle or construction machine comes with its advantages: primarily convenience, reliability, and the familiarity of equipment you may use frequently over the course of years.
However, buying isn’t a contractor’s only option, and renting can sometimes be more cost- effective and efficient than purchasing a fleet vehicle outright.
Renting is a great way to supplement core fleet vehicles, free up business capital, and minimize vehicle upkeep costs like maintenance, repairs, vehicle storage, and transportation to sites or
when vehicles break down.
Choosing to rent can also help contractors manage rising fuel prices. Buying a vehicle locks you into a particular make, model, and fuel efficiency. Over time, a purchased vehicle will slowly become obsolete. With renting, you’ll always have access to the newest and most fuel-efficient construction vehicles or machines available.
Renting may also provide a contractor with access to cost-friendly electric and alternative-fuel vehicles, helping them reduce their fuel expenses even further.
A fleet composed of both rental and owned equipment will provide contractors with a good balance of the benefits of both options.
4. Add a Fuel Surcharge to New Contracts
While not popular among customers, sometimes the only way to manage rising fuel prices is to pass along the cost increase. Adding additional fuel fees or surcharges to new contracts or increasing the overall contract price to cover rising fuel costs will help contractors manage the current fuel price spike.
When other options fail – like improving fleet fuel efficiency or sourcing the cheapest fuel available in your area – the fuel surcharge is a good fallback option to consider.
The specific amount of the fuel surcharge can vary depending on current fuel prices and the needs of a particular client. For example, some customers may have projects that require the use of machines that require an unusually large amount of fuel to operate.
Charging a larger fuel surcharge for these projects may help you adjust contract pricing based on how much fuel-intensive projects will increase typical operating costs.
5. Consider Electrifying Your Fleet
Rising fuel prices and a volatile oil market are likely to cause problems for contractors well into the future. Even after the current fuel price crisis ends, future market shocks could easily lead to steep fuel prices next year or the year after.
In addition to adopting more fuel-efficient vehicles and using software to improve fleet fuel efficiency, contractors can also utilize vehicles that don’t need gas or diesel at all.
Electric vehicles are a serious investment, and available EV options won’t offer the same variety as the internal-combustion-engine vehicle market. However, adopting one or more EVs could allow contractors to minimize the impact of high fuel prices on their profits or avoid paying for fuel altogether.
As the EV market expands over the next few years and electric construction equipment becomes more accessible, going electric will become steadily easier for contractors.
More EVs and electric construction machines will become available, providing contractors with options at varying price points. At the same time, a robust used EV market will begin to develop, providing contractors with access to cheaper-than-ever EVs.
Planning the total or partial electrification of their fleet now can help contractors prepare to save money on fuel prices in the near future, even if they’re not willing to adopt an EV right now.
How Construction Contractors Can Manage Rising Fuel
Experts believe fuel prices are likely to continue rising and that future fuel price spikes could be an inevitability. Because contractors can’t do without fuel, they’ll need to find new ways to
manage fuel prices.
Fleet management technology, high-efficiency vehicles, renting, and fuel surcharges can all help contractors cope with rising fuel costs. As a long-term strategy, investing in electric construction equipment may also help.
In any case, finding ways to both increase revenue and decrease fuel costs will help contractors navigate the current fuel market.