DTN
WHITEPAPER
DTN Fuel Buyer
The Ultimate Way to
Maximize Fuel Profits
BY Cathy Duncan
Senior Product Manager, DTN
During the last few years, a lot has
changed in the way that petroleum
marketers source their fuel.
Continued market volatility has
forced companies to both adapt
to these changes and constantly
reevaluate their decisions in order
to protect already slim margins.
Since experts agree that this market
volatility is unlikely to ease over the
next 12 months, perhaps it’s time to
take a closer look at how your company is responding to these changes:
• 6 p.m. Price Change
When prices changed at midnight,
buyers had the opportunity to adjust
their pull decisions after the market
closed, but before the new price
came into effect. Now 6 p.m. price
changes narrow this window of opportunity by six hours, eroding a
buyer’s ability to protect the margin
basis. Adding to this is the fact that
some prices may still only change at
midnight, making comparison even
more difficult.
WHAT THEY’RE SAYING ABOUT...
DTN FUEL BUYER
“What I like best about using DTN
Fuel Buyer™ is that I’m able to have
my purchasers and dispatchers buy
from the right supplier at the right
time and that saves us an incredible
amount of money over a year.”
Cory Wiltbank, General Manager
SKS, Inc., Escondido, CA
• Intraday Price Changes
A midday price change used to be
so rare that most of us can recall the
major events that prompted them.
Today, volatile market conditions
force suppliers to react much more
frequently—both up and down. This
means that buyers are often caught
unaware, sometimes even missing
the price change completely, which
could result in a devastating impact
on profit margins.
• Bigger Price Moves
While price moves used to typically
be in “points,” today’s moves are
more likely to be in several cents.
In this scenario, you might be able
to protect your regular margin, but
did you lose an opportunity to have
an even better margin by not being
more strategic in your plan?
• More Contract Prices
Many suppliers and petroleum
marketers are responding to volatility and securing ratability with more
VISIT WWW.DTN.COM/REFINEDFUELS OR CALL 1.800.391.1175
“The DTN Spot Ticker is my favorite feature. For knowing what the
price is going to do, it’s almost like
a crystal ball. I’d basically be blind
without it.”
John McQuery, Fuel Manager
Hampel Oil, Wichita, KS
“Using DTN Fuel Buyer has
allowed us to make better decisions.
It’s allowed us to keep customers
more up-to-date. With bid loads,
commercials and items such as
those, the service makes decisionmaking a lot easier.”
Stephen Ronning
Wholesale Marketing Director
Missouri Valley Petroleum
Mandan, ND
“We were having a real problem
for a while because we weren’t
catching all the midday price changes. If I’m missing a price change, it
could easily be a $200
or $300 loss on one misload.”
Joani Shelton
Fuel Operations Manager
Red Rock Distributing
Oklahoma City, OK
T he U l ti m ate W a y to Ma
“off-the-rack” contract deals. Based
on how markets are moving, these
contracts can be extremely advantageous — but pose a challenge to
track and compare with rack pricing.
• Supply and Pricing Dynamics
More frequent outages or lack of
allocation have added more pain to
operational costs. But these supply
challenges can bring opportunities
that are easy to miss. It used to be
a fact of life that the lowest-priced
supplier for the “lead” product in a
load was always the right answer, and
that splash blending was an inconvenience. Today, many are capitalizing
on significantly stronger margins by
evaluating pull options they previously would not have considered.
• An Evolving Supplier Mix
Increasing competition is emerging
in many markets with more supplier
options that often make advanta-
geous lower price moves during the
day. While you may know this morning’s low rack supplier and how they
measure up to your options, are you
able to watch this as those midday
changes come online? Rather than
just looking at a year’s historical
performance — which rarely captures
midday moves — frequently keeping
an eye on the midday changes can
also improve your strategy.
Are You Missing Opportunities?
At its most basic level, the petroleum
-marketing business is about volume,
i.e. moving millions of gallons and
being very, very smart about how it’s
done. For many, the average margin
for an 8,000-gallon truckload of fuel
is approximately $75, or a little less
than a penny per gallon. So if there’s
a swing of as little as two or three
cents per gallon, the potential exists
to either double or triple the margin
on a single load, or lose two or three
times the investment if caught on the
wrong side of the swing. In fact, if a
single penny per gallon was saved
on five loads every week that could
potentially add more than $20,000 to
a company’s bottom line.
Unfortunately, too many people in
the wholesale petroleum sector have
yet to grasp the negative impact
of “doing it the way we’ve always
done it,” mainly because most don’t
have a way to go back and measure
how they actually did against how
they could have done. If they have
ever really analyzed their company’s
performance over a month to see
what they purchased and what they
could’ve or should’ve purchased,
they would see the huge effect that
uninformed fuel buying can have on
profit margins.
Watching the spot markets is very
important, but is it enough? Many
may already watch spot markets in
one place; read news in another,
track contracts on an Excel spreadsheet; evaluate blends such as
ethanol on a calculator; try to
remember freight costs inclusive
of surcharges; keep up with
midday changes on scattered pieces
of paper, Web sites and the EIA
report every Wednesday morning. Is
all this a realistic solution to protect
and grow an already slim margin?
Identifying the growing levels of
market volatility and the demand for
up-to-the-minute information, DTN
has created Fuel Buyer™, a fully
integrated fuel-buying solution
targeted specifically to buyers of
VISIT WWW.DTN.COM/REFINEDFUELS OR CALL 1.800.391.1175
Ma x i m i z e F ue l P r o f it s
refined fuels. This online service
provides a centralized, integrated
source to evaluate posted rack prices
against indexes, contracts, spot
markets, as well as rack lows and
averages. This enables DTN Fuel
Buyer users to react rapidly to sudden
changes in the market, while making
the most-informed buying decisions
and optimizing profit margins.
Convenient Dashboard
of Critical Information
DTN Fuel Buyer is intuitive and
easy-to-use, while offering
capabilities to fuel buyers to make
smart—and more profitable—buying
decisions. DTN Fuel Buyer offers all
of the relevant information you need,
presented in an easy-to-read online
format, including:
• Price Alerts
Midday price changes are now a fact
of life. And staying on top of them
is very important. A flashing “Price
Alert” symbol lets the user know that
a price change has just occurred.
Price Alerts can also be sent to a
user’s cell phone or e-mail account.
• DTN Spot Ticker
Local spot markets have become
a primary driver in determining
supplier postings at the rack and
DTN provides one of the best
independent sources for what those
markets are doing. DTN Spot Ticker™
relies on constant canvassing of
refiners, marketers, traders, brokers,
etc., to establish a dynamic basis
along with a live or delayed NYMEX
ticker. DTN Spot Ticker is the singlebest source for the latest accurate
spot price for conventional gasoline,
RBOB, ultra-low-sulfur diesel,
low-sulfur diesel, No. 2 heating
oil and jet fuels in all seven of the
country’s major regional markets.
• DTN MarketWire Headlines
The days of trolling through search
engines for the latest industry
news are over as the most
important headlines from DTN Market Wire™ are listed
on the home page.
• Market Analysis
This customizable area, which is
updated every minute, is populated
with all of the cities where a user
receives prices. Fuel buyers can
evaluate their prices and look for
better ones in a market, while also
using rack price intelligence to
benchmark suppliers against other
suppliers. Supplier discounts can be
automatically applied so that you’re
comparing your real acquisition costs.
• Price Analysis
Users also have the capability of
filtering prices by supplier, terminal,
city, branded vs. unbranded, posted
or adjusted for discounts. Users can
view what prices are in effect based
on the time they select, or all prices
received for the day; as well as for
the past 30 days.
• Rules-based Blending
and Contracts
Fuel buyers can build dynamic rules
that automatically generate prices
based on self-selected criteria. Is it
more cost effective to splash ethanol
with gasoline or buy it pre-blended?
MAXIMIZE FUEL PROFITS
What’s the latest biodiesel price?
These blended prices update
whenever a component price
changes—even midday. You can
create a price with a differential
based on another price (ex: dyed
price from un-dyed price) or define
off-rack contracts, including those
based on indexes such as Platt’s
and NYMEX.
• Best Rack
This tool allows users to evaluate
their best options for pulling
product from a terminal city or group
of terminals. Unlike traditional bestbuy tools, DTN Fuel Buyer allows
the user to calculate the best overall
cost for the specific load needed by
factoring in price, product, gallons
and even freight. It virtually eliminates
the guesswork and profit drain from
less than optimal dispatches.
DTN Vision: Maximizing Fuel Profits
With DTN Fuel Buyer, you always
know if you’re getting the lowestcost product and will be able to
easily determine situations where
you’re not—with the ability to instantly adjust them. You’ll be able to
better determine, much earlier in the
day, what the next day’s prices could
be and adjust your buying decisions
accordingly. You’ll know in real-time
how the market is changing and how
those changes can affect your bottom line. Finally, you can sell smarter
by procuring product at the lowest
price in an up-and-down market.
in the future. DTN envisions a day in
the not too distant future when Fuel
Buyer users can click a button and
send an order to a supplier, a driver
or terminal, and offer the ability to
reoptimize the load up until the
driver swipes his card at the terminal.
DTN is truly integrating the refined
fuels supply chain, with integrated
bills of lading, dispatch optimization
and order-based loading capabilities.
DTN Fuel Buyer represents the
industry’s best solution to maximize
the profitability of a fuel-buying
operation. Product enhancements
are planned that will make DTN Fuel
Buyer even more profitable for users
DTN FUEL BUYER
A PENNY SAVED...
With the typical 8,000-gallon load of fuel having a return,
on average, of a little less than 1 cent per gallon, that means
a roughly $75 profit margin per load. With even a seemingly
minimal increase to 3 cents per gallon, something that the
technology offered by DTN’s Fuel Buyer can help make
possible, that little pile of pennies can quickly turn into a
mountain of dollars, as the following chart reveals:
Average Load
8,000 gallons
Average Margin/Load
< $0.01/gallon or around $75
Price Change Saved
$0.02/gallon
Adjusted Margin/Load
~ $0.03/gallon or around $225
Margin Increase For:
5 Loads/Day
10 Loads/Day
25 Loads/Day
~ $1,125
~ $2,250
~ $5,625
Margin Increase For:
25 Loads/Week ~ $5,625
50 Loads/Week ~ $11,250
125 Loads/Week ~ $28,125
Yearly Margin Increases For:
25 Loads/Week ~ $292,500
50 Loads/Week ~ $585,000
125 Loads/Week ~ $1,462,500
VISIT WWW.DTN.COM/REFINEDFUELS OR CALL 1.800.391.1175