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A fuel contract is a type of futures contract that helps you to avoid the risk of 5uctuating
fuel prices. When you enter into a fuel contract with a wholesale provider, you agree to buy Retif Races for a Cure
a speci<ed amount of fuel from this provider. The wholesale provider agrees to provide you
with fuel at a speci<ed volume and price.

A typical fuel contract determines a set price per gallon for the amount of time agreed
upon by both parties. Fuel prices may 5uctuate during that time, but the price you pay
stays the same due to the fuel contract in place.

A guaranteed price for fuel helps you better manage a budget and save on overall fuel
expenses.

Components of a Fuel Contract

Whether you are purchasing diesel fuel, gasoline, crude oil, or another re<ned product, a
fuel contract involves both a buyer and a seller.

You, as the buyer, determine the average amount of fuel you need. When you enter into a
fuel contract, understanding your fuel needs is key to avoid overpromising or exceeding
expected usage. It is never a good idea to contract 100% of your expected volume.

Price is also a key aspect of entering into a fuel contract. The fuel seller will provide you
with a quote that should be based on the average price per gallon. The price per gallon will
differ depending on the type of fuel you need and market conditions.

Types of Pricing Contracts

There are four main types of pricing contracts: Fixed-Price Contracts, Price Cap Contracts,
Trigger Contracts, and Price Collar Contracts. The type of fuel contract you choose should
help you lock in fuel costs at a lower price for a higher pro<t margin. Talk to your supplier
about which type of fuel contract works best for you.

Fixed-Price Contracts

A <xed-price contract allows you to lock in a speci<c price for a set time period. With this
type of contract, you agree to pay a speci<c amount per gallon whether the market price of
the fuel goes up or down. If the market price for fuel goes up during the contracted period
of time, then your <xed-price fuel contract will help you save money. Locking in a set price
can help you avoid unpredictable swings in the commodities market.

Price Cap Contracts

A price cap contract sets a limit on how much the fuel supplier can charge you per gallon.
A price cap is also known as a price ceiling, which means the seller cannot charge you
higher than the limit. This can allow you to pay a lower amount per gallon when the market
price falls below the cap price. A price cap contract can provide you with upside protection
and price certainty in a 5uctuating fuel market.

Trigger Contracts

A trigger contract sets a basic level for fuel price per gallon and the contract is triggered
only when the market reaches a certain level. This type of contract will have a set price or
date agreed upon by both the buyer and the seller. When this price or date is met, this
triggers the contract to begin.

Price Collar Contracts

A price collar contract sets a cap and a 5oor on how much a fuel supplier can charge you
per gallon. This means your price will not exceed an agreed-upon high and will not fall
below an agreed-upon low. When the market prices rise, this type of contract has a ceiling
price in place. When the market price lowers, there is also 5oor price. This means you may
risk the market price dipping below your agreed-upon 5oor price.

The Bene;ts of a Fuel Contract

A fuel contract can bene<t both the buyer and the seller. A fuel seller bene<ts from a fuel
contract by ensuring a consistent supply of product and fuel sales. This allows sellers to
provide buyers with a steady supply at predetermined prices.

Decrease volatility of fuel costs

When you enter into a fuel contract with a seller, you can spend less time worrying about
5uctuating fuel market prices and availability. A fuel contract can help ensure you always
get fuel even when supplies are running low. When re<neries or pipelines go down it can
cause scarcity and sky-high prices for the smallest of quantities.

A fuel contract helps you lock in at a certain price for fuel or even a price range, particularly
when 5uctuations may lead to higher prices for others.

Better forecasting

A fuel contract will help you to better forecast your fuel requirements and budget needs
when you lock in fuel pricing, giving you a better bottom line and increasing your
pro<tability.

When you commit to a futures contract with a fuel seller, you can expect reduced fuel
costs and reduced variability. This helps you to avoid any unforeseen costs and can help
protect your pro<t margins. In addition to locking in lower fuel costs, fuel contracts help
avoid spikes in pricing with the marketplace.

A fuel contract might take more work and expenses on the front end, but it can help you
save signi<cantly on future fuel prices in a market that is constantly changing.

News
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