For businesses in Puerto Rico that rely on diesel for fleets, equipment, machinery, or backup power generation, market fluctuations can make it difficult to plan for fuel expenses. A fixed-price diesel contract allows you to set an agreed-upon price for a defined period, helping businesses gain greater clarity on their diesel purchases and better manage their budgets.
American Petroleum works with businesses that require fuel supply solutions tailored to their consumption needs. Through a fixed-price diesel contract, customers can establish pre-agreed terms for purchasing diesel based on their operational needs.
Why diesel prices are so unpredictable and how they affect your business
Gasoline and diesel prices can fluctuate due to domestic and international factors that impact the energy market. For businesses with recurring fuel consumption, these fluctuations can pose challenges when forecasting expenses and making purchasing decisions.
Some factors that can influence the price include:
- The price of West Texas Intermediate (WTI) crude oil. International benchmarks such as West Texas Intermediate (WTI), along with other energy market conditions, can influence the costs of petroleum-based fuels.
- International conflicts. Geopolitical changes can affect global oil production, transportation, and availability, leading to fluctuations in fuel prices.
- Maritime logistics and the Jones Act. Puerto Rico relies heavily on maritime transport for its supply chain. Transportation costs, vessel availability, and requirements governing maritime trade between U.S. ports and Puerto Rico can all be part of the logistical conditions that affect fuel supply.
- Seasonality and demand. Periods of peak consumption can lead to changes in demand and affect market conditions.
- Hurricanes and other emergencies. Weather events can impact infrastructure, transportation routes, and supply logistics, creating additional challenges for companies that rely on diesel.
When a fixed-price diesel contract is advisable
| Scenario | Market price (without contract) | Fixed-price diesel contract |
| Diesel price rises 20% | The cost of fuel increases based on market conditions. | The price per gallon remains fixed according to the terms established for the duration of the contract. |
| Diesel price falls 15% | The company can benefit from a reduction in the market price. | The price per gallon remains as agreed upon for the duration of the contract. |
| Stable market during the contract | The cost remains subject to market conditions. | The company maintains a pre-established price per gallon for its diesel purchases. |
| Emergency, hurricane, or conflicto | There may be greater variation in market prices. | The company has a price per gallon established according to the terms of the contract. |
Who needs a fixed-price diesel contract
| Company profile | Why a fixed price might be right for you | Risks without a contract |
| Transportation and logistics fleets | For operations involving fixed routes, deliveries, and consistent diesel consumption, it can make it easier to forecast fuel-related expenses. | Price fluctuations can affect daily operating costs and expected profit margins. |
| Hospitals and healthcare facilities | It can help plan for expenses associated with diesel used in backup generators and critical equipment. | A price increase can raise fuel costs during periods of high demand. |
| Pharmaceutical and manufacturing industries | It allows for clearer management of diesel costs used in processes, equipment, or facilities that rely on fuel. | Unexpected changes can lead to variances from the established budget. |
| Municipalities and government agencies | It can support the management of budgets allocated to services that require continuous diesel consumption. | Market fluctuations may require adjustments within the budget period. |
| Hotels and resorts | It can facilitate planning for diesel consumption associated with generators and operations with high energy demands. | Increases in fuel costs can impact expenses during peak seasons. |
| Construction and infrastructure companies | It helps project diesel expenses for heavy machinery and equipment used in projects. It can also assist in bidding on long-term projects. | Price changes may affect budgets set for ongoing construction projects. Price fluctuations may also affect the profit margins of projects bid on prior to the price changes. |
How American Petroleum’s fixed-price diesel contract works
A fixed-price diesel contract is a commercial agreement between American Petroleum and the customer that sets a specific price for a defined period.
It is a business tool that allows companies to determine the cost of the contracted diesel in advance and better organize their fuel purchases.
It is not a financial instrument or a strategy for speculating on future market fluctuations. It is a commercial agreement designed to establish terms for purchasing diesel.
The price per gallon is set according to the commercial terms agreed upon between American Petroleum and the customer, taking into account the components defined in the contract.
The fixed-price diesel contract establishes the commercial terms agreed upon between American Petroleum and the customer. Depending on the established terms, it may include:
- A committed volume of diesel purchases during the agreed-upon period.
- A fixed price per gallon established according to the conditions defined in the contract.
How to sign up for a fixed-price diesel contract with American Petroleum
- Contact your account representative. If you are already an American Petroleum customer, contact your representative directly. If you do not yet have an account, you can call (787) 794-1985 or email info@americanpetroleumpr.com.
- Provide your estimated consumption. Indicate the approximate volume of diesel you use, the type of operation, and the period for which you wish to establish the contract.
- Receive your personalized proposal. Your representative will assess your consumption needs and present a proposal with terms tailored to your company.
- Sign and activate the contract. Once the conditions are accepted, the terms and price established in the contract take effect for the agreed-upon period.
- Receive diesel at the contracted price. Your deliveries will continue as coordinated with American Petroleum, while the price remains fixed according to the terms of the agreement.
If your company has recurring diesel consumption and is looking for an alternative to better plan its fuel purchases, contact American Petroleum. Our team can guide you through the available options based on your supply needs.
Call (787) 794-1985 or email info@americanpetroleumpr.com to speak with our team.
Frequently Asked Questions about fixed-price diesel contracts in puerto rico
What is a fixed-price diesel contract, and how does it work?
A fixed-price diesel contract is a commercial agreement that sets a specific price for fuel over a defined period. This allows companies to know in advance the cost of the contracted diesel and better manage their fuel purchases.
Is a fixed-price diesel contract the same as fuel hedging?
No. A fixed-price diesel contract with a supplier is a commercial agreement to establish terms for purchasing fuel. Financial hedging is a tool used in financial markets to manage exposure to price changes.
What happens if the price of diesel drops after signing the contract?
The price remains fixed according to the terms established for the duration of the contract. The company gains greater clarity on the cost of the contracted fuel during that period.
What is the minimum volume required to qualify for the fixed price?
The required volume depends on the characteristics of each operation, estimated consumption, and contract terms. American Petroleum evaluates each request based on the customer’s needs.
Can the fixed-price diesel contract be combined with emergency deliveries?
Delivery conditions depend on the agreement established with each customer and prior coordination with the account representative. For operations with critical needs, it is advisable to plan ahead.
Sources used/consulted:
- U.S. Energy Information Administration. “Petroleum & Other Liquids.” U.S. Energy Information Administration, U.S. Department of Energy, https://www.eia.gov/petroleum/.
- U.S. Energy Information Administration. “Crude Oil Prices: West Texas Intermediate (WTI) – Cushing, Oklahoma.” U.S. Energy Information Administration, https://www.eia.gov/dnav/pet/hist/rwtcd.htm.
- U.S. Energy Information Administration. “Puerto Rico Territory Energy Profile.” U.S. Energy Information Administration, https://www.eia.gov/state/?sid=RQ.
- United States Department of Transportation. “Jones Act.” Maritime Administration (MARAD), https://www.maritime.dot.gov/.
- National Oceanic and Atmospheric Administration. “Hurricanes and Climate.” National Oceanic and Atmospheric Administration, https://www.noaa.gov/hurricanes
- American Petroleum Institute. “Diesel Fuel.” American Petroleum Institute, https://www.api.org/.