How will fuel prices impact your business in the coming months and years?
How will fuel prices impact your business in the coming months and years? To prepare our customers for the potential changes in near- and long-term energy markets, World Kinect hosted a webinar featuring three experienced energy experts. They discussed factors impacting supply and pricing over the past six months as well as those to keep an eye on going forward. Fuel supply and demand, price risk management, and leveraging renewable diesel for decarbonization were all covered to keep customers aware of potential changes on the horizon. Here are the highlights.
Shifting insecurity
Energy markets seem to have stabilized since the record volatility of 2022, but fundamental imbalances in supply and demand are causing continued insecurity, according to Nicole Leonard, Director of Energy Transition Consulting at S&P Global Commodity Insight. Although the factors causing insecurity have shifted, fuel markets are unlikely to stabilize anytime soon.
It was a limited supply that drove prices skyward in 2022, but global oil production has now increased to close that gap. In addition to greater OPEC+ and U.S. production, there’s been significant supply growth from countries around the world. Now demand is the variable driving insecurity.
The uncertainty around demand mirrors the current global economic uncertainty. Consumer sentiment is down, which signals a slowdown in global trade and industrial production. This is in part because instead of buying goods, buyers are turning toward experiences. The resulting high demand for airline fuel is forcing summer prices higher. But this seasonal uptick is unlikely to last, and markets are still feeling bearish about longer term demand and pricing.
Planning for uncertainty
When your organization relies on fuel, volatility can wreak havoc on budgets and planning. Deborah Neal, Director of Price Risk Management for World Kinect, shared insights on price risk management strategies that can help hedge against price fluctuations and market insecurity.
Using a set volume over a set period of time, a fixed forward price (FFP) can give you budget certainty. Contact your account manager to discuss whether this solution or other options can help you mitigate the price risk of your fuel procurement.
Decarbonizing with renewable diesel
Decarbonization is an increasingly important priority for U.S. businesses, and renewable diesel is an easy way to reduce carbon emissions. Dan Cappello, Director of West Coast Land Fuel Supply and North America Renewable Fuels at World Kinect, gave an overview of this sustainable option and projections for expansion across the country.
Produced from renewable feedstock instead of petroleum, this clean fuel is a drop-in replacement for diesel. It is odorless, burns more efficiently, and performs better in cold weather. Right now, renewable diesel is mostly available in California, Oregon, Washington, and Houston, Texas, but states like New York, New Mexico, and Minnesota have supportive legislation pending, and several other states are investigating this option for decarbonizing transportation and improving air quality.