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Fuel Clause

Discussion in 'Commercial Snow Removal' started by Santo, Sep 14, 2003.

  1. Santo

    Santo Banned
    Messages: 255

    What with these fuel prices going through the roof I was wondering does anyone use a clause in their contracts or just raise the numbers outright?
     
    Last edited: Sep 14, 2003
  2. Mike 97 SS

    Mike 97 SS Banned
    from U.S.A.
    Messages: 1,106

    I cant help with the original question, but I can tell you that the prices are starting to drop now. My dad owns a gas station auto repair shop and during this week the price of gas went down 4 cents. Not a big deal, no, but I think its gonna keep dropping as time passes. Diesel is another story, it stayed right where it was, didnt go up and didnt go down. By winter I would think gas prices will be somewhat near what they were before they went crazy, but usually diesel rises in the winter time, so you guys who run diesel trucks and diesel equipment may have to raise the price of your services. Mike
     
  3. Mick

    Mick PlowSite.com Veteran
    from Maine
    Messages: 5,546

    Fuel prices here are actually going down some. I generally figure in a 10% gas price hike over the winter. If it goes over that, like it did last year, I just eat it. My thinking is that you made a deal, stick with it unless you're going to lower your prices if the cost of gas goes down.
     
  4. Santo

    Santo Banned
    Messages: 255

    Mike , they tend to go up like a rocket / down like a parachute.We've always used heating oil for the deisel to stop the bleeding there, but regular unleaded is up to $1.80 here.
     
  5. Mike 97 SS

    Mike 97 SS Banned
    from U.S.A.
    Messages: 1,106

    Thats what we are at right now. $1.799 for regular unleaded 87 octane. $1.999 for super unleaded 93 octane. Funny thing is you cant set the pumps any higher than $1.999. So if it did in fact go higher, we would have to improvise somehow. So right now we got the super pump maxed out. :D A few years ago, the diesel went over $2 a gallon, $2.14 to be exact, and we did some improvising. Can anyone guess what we did? No? Ok. What we did was figure out what we wanted to sell the fuel for per gallon and set the pump for half that amount. It had to be an even number too, an odd number price doesnt divide evenly with the way the pump can be set. So we were going to charge $2.14 per gallon, so we set the pump for $1.069, which is really like charging $1.07. So when someone came in and asked for $5 worth, you stopped the pump at $2.50. If they filled up and the pump read $23, they owed you $46. I had alot of people I had to explain what I was doing, half thought I was full of crap, the other half understood immediately. Either way, there was nothing else we could do, and what we did worked fine, as long as people were understanding about it. Thats 1 reason why Im glad the gas price didnt go over $2 a gallon because I really didnt feel like having to go through that again explaining to everyone what I was doing, and having them look at me like I was from another planet. Mike :waving:
     
    Last edited: Sep 14, 2003
  6. Lawn Lad

    Lawn Lad Senior Member
    Messages: 407

    Fuel is a minor part of your costs as a whole. For your budgeting, I would figure in your gas costs which give you some flexibility, and then set it there for your budget (to get your pricing). If it the cost rises, so be it.

    To go back to your customers for $6.00 (arbitrary number) seems petty. Really, on a $100 job, your fuel might be costing you an extra $.50 per job - if that. Is 1/2 of 1% really worth charging your customer?
     
  7. Santo

    Santo Banned
    Messages: 255

    Killer Idea Mike! But what did the N.J. Dept. of Weights & Measures Have to say about it? GO E A G L E S
     
    Last edited: Sep 14, 2003
  8. Mike 97 SS

    Mike 97 SS Banned
    from U.S.A.
    Messages: 1,106

    Santo, they didnt know what we were doing, they didnt come around. We have all the stickers on the pumps though approving the accurateness of how they work. Every now and then they stop by to do tests to make sure they werent tampered with and then they scrape off the old stickers and put new ones on. It didnt last long though with the price like that, a few weeks or so. Mike :waving:
     
  9. Santo

    Santo Banned
    Messages: 255

    Lawn Lad , you'd be surprized the people around here may think .5% would make 'em or break them.
     
  10. Lawn Lad

    Lawn Lad Senior Member
    Messages: 407

    I would be surprised if people are tracking their expenses so tightly that the .5% would make 'em or break 'em. If you're operating that close to break even, you've got more problems than the cost of fuel.

    If labor on that $100 plow job is 25% of your costs, for that one hour of time, if you mismanage by 1.5 minutes on that job, you'd have the same equivalent cost factor as a $.50 fuel increase over the job. If we've got guys that are managing their jobs with 90 seconds of slack... then I guess you're right.

    I would think that if "you" work on managing what you can control (e.g. travel time, production factors) that you will get a better return on your time than if you try managing what is directly out of your control (e.g. fuel costs).

    I'm not saying I like high fuel costs, but it is what it is and in my opinion is a minor expense and not worth hasseling the customer over. If I were the customer, I'd think that it is the responsiblity of the contrator.
     
  11. CARDOCTOR

    CARDOCTOR PlowSite.com Addict
    Messages: 1,310

    prices will stabilize by the time it snows
    it takes longer for prices to go down
    than go up


    cardoctor
     
  12. Mick

    Mick PlowSite.com Veteran
    from Maine
    Messages: 5,546

    I agree that the cost of fuel is not worth worrying about. My accounts are pretty spread out requiring travel of up to five miles to the next one. I thought about this since my other response and I suppose I use maybe a gallon of gas/diesel per $60 of income. So, if fuel increased by 50% (about $0.75.gal), it would reduce my income by $1.875 per $100 of income. Now, if my average drive is $30 then I need to raise the price by .55 to break even. And that's for a 50% increase in the price of gas.

    The coffee I drink per $100 of income is more than that.
     
    Last edited: Sep 14, 2003
  13. CARDOCTOR

    CARDOCTOR PlowSite.com Addict
    Messages: 1,310

    mike
    those pumps must be from the stone age

    if you change the head in the old pumps you can go to $2.99
    the new computerized pumps can set a high as you want to

    my full serve premium $ 2.50

    people dont even bat an eyepayup payup




    cardoctor
     
  14. nsmilligan

    nsmilligan PlowSite.com Veteran
    Messages: 704

    I have a fuel clause in my largest contract, funny you used .5%, because what I used is .05% for every cent/liter over 80 cents, on the average for the month of the billing, last year we saw diesel go to over $1.00/liter in March, I put the fuel clause in last spring after the fact. If I had it in then it would have meant an extra $600 that month.

    Billpayup
     
    Last edited: Sep 14, 2003
  15. Mike 97 SS

    Mike 97 SS Banned
    from U.S.A.
    Messages: 1,106

    Yup, they are the old kind. The neighborhood our shop is in, you cant have anything too nice or they break it or destroy it just for the hell of it. If anything looks too good, it attracts unwanted attention and then it gets "messed" with. You gotta keep a low profile. :cool: Mike
     
  16. Pelican

    Pelican 2000 Club Member
    Messages: 2,075

    I agree with Lawn Lad's post. "Common sense" would tell you the impact a fuel increase would have on profits is negligible. In my case, a $1 increase per gallon of fuel would require an average of $.75 increase per account, hardly worth the effort or hard feelings generated.
     
  17. Mike 97 SS

    Mike 97 SS Banned
    from U.S.A.
    Messages: 1,106

    I wish my customers were as understanding about gas prices as you guys are. If we change the prices and go up a couple pennies, you gotta hear the way these people cry. Its amazing, your only talkin how much more on 1 tank of gas if it goes up a few cents? The average car lets just say has a 20 gallon tank, so if it goes up 5 cents per gallon, and you fill your car once a week, how much more is it really costing you? A dollar more about per week? You gotta hear the way these people cry and the things they say. Customers that always bought the premium start buying the regular to make up for the difference, its so funny I think. Its not a difference of hundreds or thousands of dollars. Sometimes I think it must be me, not everyone else. Mike
     
  18. Lawn Lad

    Lawn Lad Senior Member
    Messages: 407

    It drives me nuts when people are all too willing to complain adamently about fuel costs (much of which is federal and state taxes) as well as ATM fees. If people only paid half as much attention to what they pay in taxes as they do in nominal fees and price increases due to natural fluctuations in market prices, the general electorate would have booted half of congress to the curb.

    I'm not saying some shinanigans get played with fuel prices, and nor do I think that $1.75 is justified. But again, the price increase is not worth wastingt he breath on relative to the income taxes and other taxes that we pay.

    The best thing the "government" ever did for themselves was to start taking direct payroll deductions from paychecks. People just don't think about what costs them the most in life... the single biggest line item expense that anyone of us pays comes in the form of general taxation.
     
  19. Pelican

    Pelican 2000 Club Member
    Messages: 2,075

    Mike, I meant to mention that in NY, you'd stand to be burned for your pump practice. The state law regarding this is the customer pays the amount on the pump.

    A few years ago, diesel was up at $2.39/gallon. A station I stopped at must have had a similar pump to what you describe. I pumped the fuel and went in to pay, he said I owed more than what the pump said. I protested, he said they couldn't set the pump at the actual price and figured what I owed on a calculator. I said no way, I pay the amount on the pump, paid that amount and left.

    There was no notice of what they were doing anywhere near the pump and I didn't feel comfortable with his calculations.
     
  20. Pelican

    Pelican 2000 Club Member
    Messages: 2,075

    Lawn lad, we posted at the same time. Again I concur!