Fixed Fuel Price Protection allows you to lock in a single fuel price at no up-front cost, based on a nominated volume per month, for up to 24 months in advance.
At the end of each month, a settlement will be calculated based on the variance between your fixed rate and the average price of fuel across the month. Portland will then credit or debit the difference, multiplied by the nominated volume for that month.
As Fixed Fuel Price Protection is based on a monthly transactional settlement, you are still free to purchase fuel from your usual supplier(s), with no change to your daily operations.
Travelsmart Bus are a bus company purchasing 100,000 litres of diesel per month. They are looking to fix their costs on a portion of their fuel consumption in order to fix ticket prices. They decide they would like to fix the price of 50% of their monthly volume for the next 3 months, i.e. 50,000 litres per month.
They agree a price of £1.02 per litre (excluding VAT) with Portland for the 3-month period. Fixed Fuel Price Protection requires no up-front fee and Travelsmart continue to buy their fuel in the normal way from their usual fuel supplier(s).
In month one, geo-political tensions in a major oil producing region heighten, causing the price of oil to rise on supply uncertainty. As a result, the average price of diesel in the UK across the month rises to £1.03 per litre.
As the average price is 1 pence higher than the agreed fixed rate, Portland owes Travelsmart 1 pence per litre (ppl). On 50,000 litres that is £500 paid by Portland into Travelsmart’s bank account (50,000 litres x 1p = 50,000 pence = £500).
In month two, oil-producing cartel OPEC agree to cut production, causing a supply shortage in order to boost prices. As a result, the average price of diesel in the UK across the month increases further, now to £1.05 per litre.
As the average price is now 3 pence higher than the agreed fixed rate, Portland owes Travelsmart 3ppl. On 50,000 litres that is £1,500 paid by Portland into Travelsmart’s bank account (50,000 litres x 3p = 150,000 pence = £1,500).
In month three, a trade stand-off between two of the world’s largest economies causes economic growth concerns, damaging oil demand. This causes the average price of diesel in the UK across the month to fall to £1.01 per litre.
As the average price is now 1 pence lower than the agreed fixed rate, Travelsmart owes Portland 1ppl. On 50,000 litres that is £500 paid by Travelsmart into Portland’s bank account (50,000 litres x 1p = 50,000 pence = £500).