Fuel Price Hike To Dig a Hole In Contractor’s Pocket

The headlines of increased fuel prices and their impact on the construction sector have been making rounds for a while now.

With the supply chain shortage to material unavailability, the heavy construction equipment industry has been surviving shortage waves for a while.

In addition, the massive fuel hike is just adding up as an additional headache.

Impact Of Increased Fuel Price On Operational Cost

Fuel price occupies 40% of the equipment functioning cost with a 22% share in overall operating and inventory management costs for a construction business.

With a 74% hike in comparison to last year’s fuel prices the other costs like labor, equipment lubricants, wear and tear and parts expenses are concerningly increasing.

Contractors with large projects are hustling this financial volatility. Moreover, with the ongoing discrepancies and a 3% profit margin in heavy construction projects, what contractors get versus what they pay is highly unsustainable.

A hike of 20.9% takes place in the price index for commercial and other non-residential projects from 2022 to 2023. The contractors further increase their demand to build such commercial buildings up to 19.9%.

The bid price is now less than the cost index according to the Association of Equipment Manufacturers (AEM).

Whereas amid all the economic hikes in the material and construction niche, the hike in labor cost has also increased to 6.3% since May 2023 which is marked as the largest jump in the past four decades.

Tips To Manage High Fuel Prices

Several U.S. heavy construction equipment companies are hunting ways to survive the high tide of fuel increment with smart finance management practices.

Mentioned below are some of the most effective fuel price management practices to follow; 

Cost-Effective Fueling Options

As a contractor, you may have a fuel supplier serving you for years but finding new options should not send you on a guilt trip.

The growing construction market has several fuel suppliers that can provide you with quality fuel on loyalty discount coupons. Keep an eye on them.

Bonus tip: 

Rather than finding different diesel options or shifting to expensive electric vehicles, you can also consider CNG as it is 50% more cost-effective than diesel. 

Mindful Driving Strategy

Training your drivers to opt for a fuel-minimization approach is a solid way to effectively reduce fuel consumption rate.

According to the U.S. Depart. Of Energy States, if vehicle speed reduces to 5 to 10 mph it can decrease fuel consumption by 7 to 14%,

Conversely, limiting speed with gradual acceleration to prevent torque and harsh braking also affirmatively contributes to lessening fuel consumption.

Lessening Idle Time

Another section to cover when reducing fuel consumption is minimizing the idle time of machinery. Idle time is running the engine without any purpose.

As per the survey by the U.S. Department Of Energy, 15 seconds of idling of medium to heavy construction equipment costs more fuel consumption than restarting it.

Smart Fleet Management

To combat the increased fuel price you must manage the fleet to gain optimal fuel consumption. Because poorly maintained heavy machinery is vulnerable to becoming a fuel consumer.

Poor spark plugs can increase fuel consumption by 30% while under-inflated tires increase another 4% hike in fuel costs.

So to avoid effectively managing in-house fleet issues follow the beneath-mentioned tips;

• practice regular oil changing of heavy machinery,
• tune engines
• conduct preventive maintenance sessions.

The Future Ahead

According to the recent Statista study, diesel cost per gallon has increased to U.S. $4.5 from U.S. $2.4 from 2022 to 2023. The fuel hike is likely to impact other construction operations in terms of operational, labor, and material transportation costs for projects.

While the industry is celebrating the $1.2 trillion construction market size increment, they need to save it from getting invested in increased fuel costs via fuel reduction techniques.

By the same token, planning strategies in the light of strong market knowledge and the above-mentioned fuel-saving tips can make contractors survive the fuel hike in the long run.

Nonetheless, it will be exciting to see with so many dollars invested to chase the global inflation demands, what will be the repercussions faced by the global construction sector.

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