Is fuel distribution worth it?

[badreeg]

Hey how's it going Gas Biz community.

I'm curious to know if distributing gas and diesel to gas stations is a worthwhile endeavor. I own a propane company and am experienced in the fuel delivery business but never in gas and diesel. I currently work with some gas stations and could possibly turn them over to gas and diesel clients as well. Look forward to your responses! Thanks.

 

[Gas_Biz]

Three people you will meet that are never poor. Concrete, propane and gas distributors. Some of the wealthiest guys I know are gas distributors so to me it is absolutely worth it. There are a lot of ins and outs. Do you want to try to get familiar with before making your decision. For example, do you want to do commercial accounts or retail? Do you want to be branded or unbranded? You also have the infrastructure in place to add the gallons with without increased overhead?

 

[badreeg]

Thank you for your response! I think my main question would be:

I know I can rack up the gallons but I’m not sure how many cents over my purchase price I should be targeting for to be profitable. What would be a good target range to aim for while considering the cost of driver, insurances etc?

 

[Administrator]

There's a lot to unpack here. Are you thinking of selling to contractors or retailers?

 

[badreeg]

I’m thinking of selling to retailers

 

[Administrator]

You won't like the answer. It's a volume game. Most jobbers are selling transport loads for rack plus .01 and keep the 1% discount. If it's tank wagon you obviously get a few more pennies per gallon but it really doesnt make sense without the throughput

 

[badreeg]

Sounds a little more intimidating than I expected lol.

How many loads can you send out in a typical work day with 1 truck? Assuming it’s the stops are local and the distance to the rack isn’t too far.

 

[myfolder]

Ive never really understood how jobbers make money giving 250k for a 10 year contract, Rack plus .01 with a .01 rebate given back. so practically where are they making their money? Im sure they getting some kind of discounts or maybe the fuel cost lower then rack prices for them?

 

[heasenergy]

Margins in gas diesel delivery are far less than what you experience in propane. If you are selling 1 off loads to unbranded sites, you have a large credit risk if you offer any terms to the dealer. Branded wholesalers are able to use credit cards as security against unpaid bills, but unbranded typically doesn't come with the same protection.

You asked about the pricing. Pricing is usually cost plus "X" cents per gallon plus freight. The freight charges are separate and you would work out your freight based on mileage. I would call around to carriers in your area to get an idea of what your competition might be charging.

I would think on the gas you might be able to get 2 cents per gallon unbranded, plus another 1 cent on the freight for a total of 3 cents.

I think it would be a large investment in tangwagons and trucks along with a large credit risk.

Hope that helps.

 

[Kwikpantry]

You won't like the answer. It's a volume game. Most jobbers are selling transport loads for rack plus .01 and keep the 1% discount. If it's tank wagon you obviously get a few more pennies per gallon but it really doesnt make sense without the throughput

How much volume are we really talking about?
Is the 1% discount on fuel cost at the time?

 

[badreeg]

Ii appreciate the feedback guys thank you!