Tuesday, January 26, 2010

Contracting Fuel: Troy Martinson, CGCS

After experiencing 2008’s extremely volatile fuel market, I looked for some security. Many of us remain entirely at the mercy of open market fuel prices, however; there is an option.

I called my fuel provider and began looking at contracting fuel at a pre-determined set price. This enabled me to budget an amount based upon my contracted price, regardless of what the fluctuating open market did. Not only did this benefit me in regard to accurate budgeting it saved money compared to purchasing on open market.

Fuel contracts are divided into four quarters: 1st (Jan, Feb, Mar) 2nd (Apr, May, Jun) etc… I agreed to contract fuel for the 2nd & 3rd quarters, which most golf courses will. Knowing the amount of fuel that we use, on average, during the months of these quarters I contacted 3000 gallons of unleaded and 3000 gallons of diesel. This secured my costs for the entire season. At time of contract the fuel broker will typically require 20% down. This down payment will be put toward the future purchases of the contract.

You must take delivery of all contracted fuel during the contract period or you will lose that fuel. I did not find this to be a problem. Contracting fuel is not fool-proof. You may contract at a higher price than the open market ever gets to, thus you are losing x amount per gallon contracted. However, the inverse is just as likely to happen. Regardless, you know how much your fuel is going to cost and that security is worth something to any operation running on a tight string.

I have found this practice to be very beneficial to my operation and will continue to contract fuel as long as it is reasonable to do so. If you have any questions, please feel free to contact me via e-mail or call your fuel provider.

Troy Martinson, CGCS
Sioux City Country Club
Sioux City, IA

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