Forecasting Fuel Prices and Their Impact on Your Operating Costs

Forecasting cost of fuel is critical in successfully determining future ownership and operating costs.

Key Takeaways for

Decision Makers

 

EQUIPMENT MANAGER: Recognizing fuel cost trends as well as being able to forecast those trends is key in being able to predict operating costs months to years out. These forecasts can aid in generating more accurate project bids as well as help in managing operating costs for a fleet.

Understanding seasonality when it comes to the cost of fuel is incredibly important when determining ownership and operating rates (see here for more information). However, being able to forecast cost of fuel is also critical in being able to successfully determine future ownership and operating costs. The ability to estimate future costs plays a key role in creating bids for projects years down the road.

Historical diesel and gasoline prices from 1998 to present were gathered from the Energy Information Administration. Those prices were then used to forecast fuel costs through the end of 2020. When predicting future fuel costs, seasonality was taken into account. Inflation, however, was not taken into account so all forecasted prices below are expressed in 2017 dollar values.

Forecast in the graph is based on Energy Information Administration (EIA) diesel costs from 1998 to present.

When forecasting diesel cost per gallon, it’s important to take seasonality into account. The cost per gallon typically rises in the summer months and falls during the winter months. This constant fluctuation has a direct impact on operating costs. Based on historical data from the Energy Information Administration, its projected that diesel cost per gallon will be around $3.81 by the end of 2017. By the end of 2018, it’s expected that the cost per gallon will rise another 3% to $3.94. Looking forward another year to the end of 2019, diesel costs will rise yet again to $4.07 per gallon. Forecasting through the end of 2020, diesel cost per gallon continues to increase to $4.19.


Subtype Size Class Present-End 2017 End 2017-End 2018 End 2018-End 2019 End 2019-End 2020
Skid Steer Loaders 701 – 975 lbs. 15.80% 1.10% 1.60% 1.10%
On-Highway Light Duty Trucks 100 – 199 HP 34.90% 2.50% 2.50% 2.40%


Taking a look at popular subtypes of equipment really shows the impact the forecasted diesel costs will actually have on operating costs from one year to the next. By changing only diesel cost per gallon, the operating cost of skid steers in the 701 – 975 lbs. size class could increase by 20% between now and the end of 2020. Looking at a second example, when diesel cost per gallon is the only factor changed, operating costs for On-Highway Light Duty Trucks between 100 – 199 HP are expected to increase over 40% between now and the end of 2020. Keep in mind that inflation is not accounted for in this analysis so it’s likely that diesel costs as well as operating rates could be even higher in future years.

Forecast in the graph is based on Energy Information Administration (EIA) gasoline costs from 1998 to present.

Seasonality also impacts the cost of gasoline per gallon in a similar manner; higher in the summer and lower in the winter. By the end of 2017, it’s forecasted that the cost per gallon will be around $3.36. Gasoline costs will rise another 3% and reach a cost per gallon of $3.47 by the end of 2018. The end of 2019 is expected to see gasoline costs reach $3.58 per gallon. A 6% increase will then cause the cost per gallon to reach $3.69 by the end of 2020.


Subtype Size Class Present-End 2017 End 2017-End 2018 End 2018-End 2019 End 2019-End 2020
Skid Steer Loaders 701 – 975 lbs. 17.50% 0.80% 1.60% 1.50%
On-Highway Light Duty Trucks 100 – 199 HP 37.40% 2.80% 2.70% 2.70%



Once again, looking at popular subtypes really highlights the impact that increasing gasoline cost per gallon will have on operating costs from year to year. The operating rates for skid steers in the in the 701 – 975 lbs. size class could increase over 21% between now and the end of 2020 when changing only gasoline cost per gallon. On-Highway Light Duty Trucks have an even higher expected increase. When gasoline cost per gallon is the only factor changed, their operating costs are forecasted to increase over 45% between now and the end of 2020. Again, do keep in mind that inflation is not accounted for in this analysis so it’s likely that diesel costs as well as operating rates could be even higher in future years.


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