What the Procurement Team Needs to Know About Fuel Contracts

In the complex world of business operations, few resources are as critical - or as volatile - as fuel.

For procurement teams tasked with securing reliable fuel supplies while managing costs, navigating fuel contracts can feel like walking through a minefield of hidden fees, confusing terms, and market uncertainties. Yet the decisions made during contract negotiations can impact your organization's bottom line for years to come.

Whether you're managing a construction company with dozens of jobsites, overseeing a transportation fleet, or responsible for emergency backup systems, understanding the nuances of fuel contracts is essential.

The right agreement doesn't just secure your fuel supply - it can provide price stability, emergency coverage, and operational flexibility that creates competitive advantages.

In this guide, we'll break down what procurement professionals need to know about fuel contracts in today's market, from pricing structures to contingency planning, helping you secure agreements that truly serve your organization's needs.

Ready to elevate your projects with top-notch fuel delivery? Click here to request a quote and get started: Request a Quote

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Understanding Fuel Contract Fundamentals

Before diving into the specifics, it's important to understand what makes fuel contracts different from other vendor agreements your procurement team handles.

Fuel contracts are uniquely vulnerable to market volatility. Unlike many commodities, fuel prices can fluctuate dramatically based on global events, seasonal demand, and regulatory changes. A contract that seems favorable today might become a liability tomorrow if not properly structured.

Key components of any fuel contract include:

• Base price determination - How the fundamental price is calculated (rack price, OPIS index, etc.)

• Price adjustment mechanisms - How and when prices can change during the contract term

• Volume commitments - Minimum purchase requirements and penalties for shortfalls

• Delivery specifications - Timing, locations, and methods of fuel delivery

• Quality standards - Fuel grade, additives, and testing protocols

• Term length - Duration of the agreement and renewal options

• Force majeure provisions - What happens during supply disruptionsThe most common mistake procurement teams make? Focusing exclusively on the per-gallon price while overlooking delivery reliability, emergency provisions, and hidden fees that can ultimately cost more than a slightly higher base price.

Pricing Models: Beyond the Per-Gallon Quote

When evaluating fuel contracts, understanding the various pricing models is critical to making informed decisions that align with your organization's needs and risk tolerance.

Fixed Price Contracts

What they are: Agreements that lock in a specific price per gallon for the contract duration.

Best for: Organizations that prioritize budget certainty and can commit to specific volumes.

Considerations

• Provides protection against market increases

• May result in paying above-market rates if prices fall

• Often require volume commitments with penalties for shortfalls

• Typically include premiums for the price certainty

Cost-Plus (Rack-Plus) Contracts

What they are: Pricing based on a published index (like OPIS) plus a fixed markup.

Best for: Organizations wanting transparency and market-responsive pricing.

Considerations:

• Provides transparency into the base cost vs. supplier margin

• Exposes you to market volatility (both up and down)

• Generally offers lower average costs over time compared to fixed pricing

• Requires more active budget management

Capped Pricing

What they are: Hybrid models that set maximum prices while allowing for decreases.

Best for: Organizations seeking downside protection with upside potential.

Considerations:

• Provides ceiling protection against major price spikes

• Allows benefits when market prices decrease

• Typically includes premiums for the price protection

• May have more complex contract terms

  
  

  Pro tip: The best contracts often combine elements of different pricing models. For example, securing a portion of your volume at fixed rates while using cost-plus pricing for the remainder can provide both stability and opportunity.

Hidden Costs and Fees to Watch For

The quoted fuel price is rarely the full story. Procurement teams need to identify and negotiate all potential fees that can significantly impact the total cost of ownership.

Common fees to scrutinize include:

• Delivery fees - Charges for each delivery, often varying by location or volume

• Emergency delivery premiums - Additional costs for urgent or after-hours deliveries

• Short load fees - Penalties for deliveries below minimum volume thresholds

• Demurrage charges - Fees for delivery delays caused by your site conditions

• Fuel surcharges - Additional costs added when transport costs increase

• Environmental fees - Charges related to compliance with regulations

• Administrative fees - Costs for account management, reporting, or invoicing

  
  

  Questions to ask potential suppliers:

  
  

• "What is your complete fee schedule beyond the per-gallon price?"

• "Under what circumstances might additional charges apply?"

• "Are there volume thresholds that trigger different pricing tiers?"

• "How are fees calculated for emergency or after-hours deliveries?"

  
  

  Real-world impact: One construction company we worked with was paying what seemed like competitive rates until they analyzed their actual invoices. They discovered nearly 12% of their fuel spend was going to various fees and surcharges that weren't clearly disclosed during contract negotiations.

  
  

  Need a transparent fuel partner with no hidden fees? Get a quote from Site Fuel today.

Emergency and Contingency Planning

Perhaps the most overlooked aspect of fuel contracts is what happens when things go wrong. For many operations, fuel disruptions can cause catastrophic downtime costs that far exceed any savings from a marginally lower per-gallon price.

Critical contingency provisions to include:

• Priority service guarantees - Contractual assurance of delivery priority during shortages

• Response time commitments - Specific timeframes for emergency deliveries

• Backup supplier arrangements - Secondary source agreements if primary supplier cannot deliver

• Force majeure limitations - Restrictions on when suppliers can invoke "act of God" clauses

• Disaster recovery coordination - Protocols for communication and delivery during emergencies

  
  

  Questions to address in your contract:

  
  

• What specific response times are guaranteed for emergency deliveries?

• How will allocation decisions be made during regional fuel shortages?

• What penalties apply if the supplier fails to deliver within promised timeframes?

• Does the supplier maintain strategic reserves for emergency situations?

  
  

  Case study: During a major hurricane recovery operation, a utility company with standard fuel contracts found themselves deprioritized as suppliers focused on government contracts. Meanwhile, competitors with priority service clauses maintained operations, highlighting how contingency planning in contracts directly impacts business continuity.

Flexibility and Scalability Considerations

As business needs evolve, fuel contracts must accommodate changing operational requirements without excessive penalties or renegotiation.

Key flexibility provisions to negotiate:

• Geographic coverage - Ability to add new locations under the same terms

• Volume flexibility - Reasonable ranges for minimum/maximum purchases without penalties

• Equipment compatibility - Ensuring delivery methods work with your existing infrastructure

• Reporting and visibility - Access to consumption data and spending analytics

• Term adjustment options - Ability to extend or modify agreement terms

  
  

  For multi-site operations, consider:

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• Consolidated billing options across locations

• Consistent pricing structures regardless of geography

• Centralized account management

• Standardized delivery protocols

  
  

  Pro tip: The most valuable fuel contracts balance structure with adaptability. While you need defined terms for budget planning, overly rigid agreements can become operational obstacles as your business evolves.

Ready to revolutionize your fuel management? Get a quote today and discover how SiteFuel can drive your success.

Evaluating Supplier Capabilities Beyond Price

The supplier behind the contract is as important as the terms themselves. Procurement teams should thoroughly assess potential partners' operational capabilities before signing.

Key supplier evaluation criteria:

• Geographic coverage - Can they service all your locations consistently?

• Fleet size and reliability - Do they have sufficient delivery capacity?

• Technology integration - What visibility tools and ordering systems do they offer?

• Financial stability - Are they likely to remain viable throughout the contract term?

• Compliance history - Do they have a record of regulatory issues or contract disputes?

• Customer references - How do they perform for organizations similar to yours?

  
  

  Red flags to watch for:

  
  

• Reluctance to provide references

• Limited transparency about sourcing and supply chain

• Vague language about delivery guarantees

• Excessive restrictions on contract modifications

• Limited reporting capabilities!

  
  

Conclusion: Strategic Approach to Fuel Procurement

Fuel contracts represent far more than a simple commodity purchase—they're strategic agreements that can either enhance or hinder your operations. For procurement teams, the goal should extend beyond securing the lowest apparent price to establishing partnerships that provide reliability, transparency, and appropriate risk management.

Best practices for procurement teams:

1. Align contract structure with organizational priorities - Balance price certainty against flexibility based on your risk tolerance and operational needs.

2. Look beyond the base price - Evaluate the total cost of ownership, including all fees, administrative burdens, and potential disruption costs.

3. Prioritize reliability and emergency coverage - The cheapest supplier that can't deliver during critical periods may ultimately be the most expensive option.

4. Negotiate for transparency - Ensure all potential charges are clearly documented and justified.

Consider a managed service approach - Platforms like Site Fuel that aggregate multiple suppliers can provide both competitive pricing and superior reliability through their broader network.

The most successful procurement teams recognize that fuel contracts aren't just about securing a commodity—they're about ensuring operational continuity, managing risk, and creating predictability in an unpredictable market.

Ready to see how improved fuel management could impact your bottom line? Talk to a fuel expert today and discover the difference that strategic fuel delivery can make for your operations.

Join Our Industry Leading Fuel Delivery Sales Team

We are constantly growing and expanding our services to meet the ever-increasing demand for our fuel delivery solutions. If you're passionate about providing customers with the best experience in the world and have experience in an industry that relies on efficient fuel delivery, we want you on our industry-leading fuel delivery sales team!

By joining our team, you'll have the opportunity to contribute to the growth and success of Site Fuel while helping businesses across North America optimize their fuel management.

Site Fuel's fuel delivery solutions cater to small and large enterprises, providing customizable fuel options, innovative technology, and excellent customer service. By partnering with us, you'll keep your equipment running smoothly and your business operating efficiently, setting the stage for greater success.