Choosing the right fuel oil supplier for your gas station can have a big impact on your success and profitability. Here are a few things to keep in mind as you negotiate this process.
You just bought a new gas station in a prime location. It sees regular traffic and promises a high volume of purchases. You anticipate that this acquisition could not only be successful, but very, very lucrative.
To make sure the transfer of ownership goes smoothly, you’ve made key agreements with food and beverage vendors, fleet management companies, credit card vendors, and staff. There is one critical partnership left to make: your fuel oil supplier. Before you set up meetings and start reviewing terms, here’s what you need consider in a viable fuel oil supplier.
In the October 2017 Heavy Duty Trucking article, Is the Right Oil Getting Into Your Engines?, the director of the American Petroleum Institute’s licensing program, Kevin Ferrick, points out that there’s a difference between an oil supplier meeting API standards and actually having an API license.
“An oil marketer could say ‘it meets the standard,’ but the only way to verify it’s licensed is to check with API or look at our online directory to make sure it’s really licensed,” he told HDT. “If it’s licensed, the maker is warrantying it meets the API standard. If it’s not, it doesn’t have that added assurance. So there’s a difference.”
Have an oil supplier you’re looking into? Check out American Petroleum Institute’s Engine Oil Licensing directory search. This comprehensive directory of licensed oil supply companies will allow you to search not only the company’s licensing, but whether the different viscosities it offers are also licensed.
terms you agree to should include fuel pricing based on Oil Price Information Service (OPIS) benchmarks, or a similar standard. The terms should also include a price differential from that benchmark, such as +$0.01.
Perform due diligence on the prospective oil supplier in addition to negotiating fuel price. Ask if there are any existing or foreseeable conflicts with retailers in your market. Find out if the oil companies they contract with have refineries in your market.
The company should make a point person available to you after the negotiation process, ensuring you have clear lines of communication if there’s an issue. They also should have an after-hours line that goes straight to a customer service representative, not a voicemail box or email inbox.
Credit Card Rates
As you negotiate the supplier contract, be aware that the credit card rates you agree to will significantly impact your profit margin.
It’s true that you may get a much more favorable credit card rate if your station goes through the oil supply company. This not only can save you from incurring huge costs on credit card purchases, but solidifies your relationship with your supplier.
That being said, be careful that the fees your station will pay, which typically covers the use of the supplier’s credit card machines, don’t diminish the profit you’ll make from this arrangement.
For more information about navigating the complex world of fuel processing for gas station and truck stop owners, follow Financial Fuel Services’s Industry News.