The gasoline price extremes of just a few short years ago now seem like relics of a bygone era.
The average price for a gallon of gas in 2012 was $3.68, per the U.S. Energy Information Administration (EIA). Prices averaged $2.43 in 2015 and are expected to maintain similar or lower prices throughout 2016 and into 2017.
HANDLING THE HIGHS
High gas prices have a significant effect on HVAC contractors that deploy large fleets of vehicles to dozens of job sites on a daily basis.
Matthew Pillius, owner and CEO of Royal Class Service in New Windsor, New York, said the gas prices of the last five years were crippling, especially given the country’s economic climate.
“I didn’t add a fuel surcharge as I didn’t want to run people off,” he said. “For me, there is a mindset to be a renegade and go against the tide. Fuel is expensive and such, but I wanted to be the opposite of my competition, and rather than add a fuel surcharge, I just raised our prices.”
With or without a fuel surcharge, Pillius said rising gas prices have had a major impact on his company’s service boundaries.
“Instead of tightening our service area, we actually had to go farther out to find customers,” he said. “Our immediate area tightened up, so we needed to be willing to go farther to take on business. We were traveling as far as 50 miles.”
Pillius’ efforts to actually expand his coverage area stand in contrast to approaches from other contractors, who opted to leave their coverage area the same but assess different fees.
Bobby C. Ring, president of Meyer & Depew Co. Inc. in Kenilworth, New Jersey, said his company chose to raise their diagnostic charge for residential flat rate work from $119 to $137. That was a charge the company had not raised in five years, but the additional cost of gasoline inspired the need to raise it, and, commercially, Meyer & Depew implemented increases in hourly rates.
Similarly, Rich Morgan, president of Magic Touch Mechanical Inc. in Mesa, Arizona, said his company was not in a position to tighten its coverage area due to longstanding relationships already established with clients, even when gas prices soared. Instead, Magic Touch Mechanical charged a graduated service call fee based on distance. The company has also tightened up its dispatching policies to make sure each truck is running the most efficient call schedule possible.
FINDING FUEL EFFICIENCY
An efficient call schedule is clearly important for contractors, but the next step toward even greater efficiency can be investing in a more fuel-efficient fleet of vehicles.
“We purchased a more fuel-efficient van and bought a Ford Transit. We called it the minnow,” said Pillius. “It has a four-cylinder engine and is cute, but you can’t fit anything in it, and it really hasn’t worked out with what we need to haul. We bought it from a fuel economy mindset and switched other vehicles to diesel as a response. We did take those measures, they just unfortunately didn’t help out as much as we had hoped.”
Magic Touch Mechanical purchased five Ford Transit Connect vehicles for its sales people and energy auditors and moved them out of the full-sized vans they were in.
“We also moved our install crews out of big-box trucks and purchased service body trucks to replace them,” said Morgan. “We replaced a few diesel-powered trucks with gas vehicles. We have since sold those Transits, as they were not as practical as we thought they would be. Sometimes the price of eggs is just the price of eggs.”
Meyer & Depew recently made the less drastic choice of changing its purchasing strategy from eight-cylinder engines to six-cylinder options. Ring said the company is also about to purchase a pickup truck with a lighter aluminum body to improve fuel efficiency.
PREPARE FOR THE FUTURE
Gasoline prices can fluctuate and shift in a hurry, but the EIA currently has an optimistic outlook for the rest of 2016 and 2017. Per the organization: “the U.S. regular gasoline retail price, which averaged $2.43 per gallon in 2015, is projected to average $1.89 per gallon in 2016. This would be the lowest annual average since 2004.” Looking a step further, U.S. regular gasoline retail prices are forecast to average $1.97 per gallon in 2017.
“Lower gas prices definitely have an effect on our business,” said Pillius. “At the end of last year, we were able to buy a full-size Ford Transit, which is much better than The Minnow. Ford, itself, has become more fuel efficient, and customers have that all-important disposable income back in their pockets. In our market, I go out for meals and see there are lines to eat at a restaurant. It’s little things you didn’t see a few years ago. Disposable income is back, vacations are back, and that is huge for our business.”
Morgan mentioned that lower gas prices have allowed his company to implement attractive specials more often and grow market share by meeting new customers who are normally attracted to lower-priced tuneups and maintenance services.
“Once we’ve had the opportunity to shine, we can convert that person from a customer to a client,” he said. “Happy clients have no reason to keep shopping around and tend not to quibble about higher priced services.”
Gas prices have actually jumped 40 cents or so in the last few months in New Jersey, but that hasn’t stopped Ring from reaping increased margins. He said his company saved more than $60,000 in fuel costs in 2015 over 2014. In order to ensure continued fuel savings, regardless of fuel prices, Meyer & DePew tries to keep technicians in a close geographic radius to reduce travel time, thus saving fuel in the process.
For Pillius, saving fuel now and in the future is important, and it starts with the idle times on vehicles.
“If we can look at dispatch and say Dan is closer than Brock to a job, let’s make sure we are sending Dan,” he said. “If the first call of the day is closest to where Craig lives, we want to ensure he is the one answering the call. We definitely strategize things like that. I get idle-time alerts set on a GPS. There are plenty of bona fide reasons to idle, and I don’t want guys freezing to death, but when its 50°F, let’s be reasonable. I’m in tune with those things now, and I hadn’t checked that at all prior to the recession.”
Morgan said the Magic Touch Mechanical team also pays close attention to tires and tire inflation.
“We make sure all trucks are uniformly stocked and not carrying excessive weight, and we also try to dispatch each truck as efficiently as possible and as close to the technician’s home as possible, whenever possible,” he said.
Publication date: 5/9/2016