3 Types Of Fuel Contracts For Your Business

Automotive Blog

If you run a business where you might need a lot of fuel, you are going to want to make sure that you have a constant source of fuel. If you have large fuel needs, it may make more sense to have fuel delivered to your business instead of always sending your fleet out to get fuel at alternate locations. The three types of contracts that are available for fuel delivery are collar contracts, maximum price contracts and fixed forward contracts.

  1. Collar Contracts

With a collar contract, both maximum and minimum fuel prices are included in your contract. A maximum price is established for what you will pay for your fuel, so that no matter what happens in the market, you are not charged more than the maximum price for your gas.

However, with a collar contract, you are not locked into the maximum price. A minimum price is also established for your price contract. This allows you to benefit from lower gas prices when the market is lower. Having a minimum price also allows the fuel distributors to ensure that they are able to make a profit.

  1. Maximum Price Contract

With a maximum price contract, a set maximum price is determined for the fuel. When you order fuel, your contract is set up so that you have a maximum price that you will pay for your fuel.

However, you are still able to take advantage of price changes in the market. If the rack price, which is the overall price that the distributor paid for the fuel, is lower, you will be able to get that lower price. The lower price is based on the rack price at the time of fuel delivery.

  1. Fixed Forward Contract

Finally, there are fixed forward contracts. With a fixed forward contract, the prices are set in advance. You agree to pay a specific rate for a specific period of time. This locks in a fuel price for you. If prices go up, you rate stays the same. On the flip side, if prices go down, your price will remain the same. Your price will not fluctuate with the market.

Work with your local fuel delivery company to determine the best contract for your situation. Regardless of which contract you choose, you will be charged for the next gallons that are delivered with your order although the contract prices will be based on set amount of gallons. Contact a company, like Buy Rite Fuels, LLC, for more help.