Joe Tuohy, Commercial Director of Portland, on fuel prices and a decade of supporting Scotland’s bus and coach industry.
Joe has been in the fuel industry for over 15 years now and is a regular attendee at CPT Scotland conferences. He is also been with Portland from the start and this year celebrates his own 10 year milestone, alongside the company.
Q: Joe, we look forward to welcoming you back at our annual conference in Scotland this year. What will be your key message for delegates attending?
A: This is a special year as it marks 10 years for Portland supporting Scotland’s bus and coach industry. As the market and industry has evolved so have our services, but our ethos of offering unique and flexible solutions that transform the way companies buy fuel has firmly remained.
In the last 10 years we have continued to build on our fixed-price fuel to both hedging and fuel card customers; became a VDA-approved AdBlue® supplier; introduced an online fuel pricing platform that takes complex oil trading data and simplifies into simple, actionable insight for UK companies; and most recently we have launched our new Portland Green division, which aims to bring renewable, alternative and sustainable fuel solutions to the market.
CPT has always been a great supporter of Portland services as well as a great source of guidance and information for the industry. We are delighted to be back again.
Q: You mentioned fuel hedging, what advice would you give to the industry? How far forward should they do it? And is there a ‘best’ time of year to hedge?
A: Hedging fuel is like taking out a fixed rate mortgage. When you take out the mortgage, you don’t know whether this will be a good or bad interest rate in the long-term. But you do it because you know how much you can afford each month and that is the amount you want to lock away. Hedging fuel is the same.
If Portland gives you a fixed price for the next 12 months, I can’t tell you whether that is going to be a ‘good’ or a ‘bad’ price – but it is ‘the’ price and it’s not going to change. In terms of hedge duration, the Big Five often look for longer hedges (3-5 years), but we tend to recommend 12 month fixed prices.
Finally, the best time to hedge is when you want to set your budget -whenever that may be.
Q: What is AdBlue® and why do we need it?
A: Since 2005, legislation on diesel vehicles in the UK & Ireland, and in the rest of Europe demands a drastic reduction of NOx emissions. Vehicle manufacturers have had to re-think the exhaust system on their vehicles and more vehicles (including PSV’s) are now equipped with AdBlue® using SCR systems in the exhaust. Therefore, AdBlue® helps diesel vehicles fitted with SCR technology to operate within LEZ zones.
Scotland has already launched the bus emissions abatement retrofit (BEAR) programme that allows up to £25K per vehicle to retrofit technologies such as SCR units – this should help update older passenger transport vehicles before the 2022 deadline.
Q: Will we see AdBlue® prices increasing over time as we see more buses on the road fitted with SCR technology?
A: Public service vehicle (PSV) operators are already using AdBlue® and as consumption increases, we can provide options to better manage AdBlue® spend. Usage for large road vehicles is around 4-6% of diesel consumption, so it doesn’t take long to calculate that over the course of a year, a variable cost like AdBlue® could impact profitability if not managed properly.
Improving how you buy AdBlue® could include buying in bulk, IBC or drum barrels; negotiating an on-site tank installation with your bulk supplier, or having a fixed-price agreement on your AdBlue® supply. We can help with all these options to help bus and coach operators manage their AdBlue® spend better.
Q: What are your thoughts on oil prices long-term?
A: Energy demand will continue to go up, but by then we will be seeing some real game changers in the oil world – the number of electric cars, for example. Plus we may start to see environmental legislation ratcheting up as governments see fossil fuel taxation as a vote winner, rather than a vote loser.
In this set of circumstances, oil consumption may significantly decline. However, prices will continue to be driven by supply and demand and whenever those two factors go out of kilter, then you will see price volatility.
Q: Finally, we couldn’t let you go without asking about Brexit and impact on fuel prices. What would be your advice to the industry on how to best manage their fuel spend?
A: Clearly there still remains huge gaps in our knowledge of how Brexit will pan out and in particular the impacts of a no-deal Brexit. Fuel supplies won’t be affected and only a prolonged period of panic buying could change that. Prices on the other hand could significantly be affected, be that a function of exchange rate movements, tariffs or increases in freight rates. Who knows what will happen, but if you are worried, then you should be talking to Portland!
This article originally appeared in a special edition of Passenger Transport magazine, entitled Scotland’s Buses 2019.