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Fuel and Logistics Challenges Facing the Aviation Industry

There are increasing challenges within the petroleum distribution chain that affect how aviation fuel is produced, stored, delivered and priced. With current market trends expected to intensify, it’s important to understand the challenges and adapt.

Avfuel’s mission is to assure our customers get the fuel they need at a fair price. Understanding the complexities of managing fuel supply and the proactive steps needed to mitigate risks will allow for smoother operations.

THE CHALLENGE: PRODUCTION

With multiple refinery partners and a strong supply network, Avfuel is well positioned to meet fuel demands. But the following limitations have decreased flexibility for all industry fuel providers:

  • The number of refineries in the U.S. has decreased from 301 in 1982 to just 141 in 2016.[1]
  • Aviation fuel comprised just 9.9% of U.S. refinery yield in 2016 [2]—aviation isn’t a refinery “power player.”  
  • Suppliers can’t place variable orders; they are held to weekly nominations to ensure supply meets demand.
  • With fewer refineries/more stringent inventory practices, the average haul mileage nearly doubled in ten years.

THE CHALLENGE: TRUCKING

Transporting fuel in a cost-efficient and timely manner has become more complicated. Many companies throughout the trucking industry have a shortage of drivers and are finding it difficult to recruit new employees.

  • There is a shortfall of nearly 50,000 truck drivers--compared to only a shortage of 30,000 in 2013.[3]
  • Will require more than 96,000 new drivers per year over the next 10 years to keep up with consumers.[4]
  • Driving is a less desirable profession due to increased licensing, training, health care costs and time away.
  • Transporting avgas is even more complicated as hazardous materials require dedicated trucks.
  • The DoT reduced maximum number of driving hours with fines for both the driver and the company.
  • Retiring baby boomers aren’t being replaced fast enough. The avg. driver is 49, while the avg. worker is 42.[5]
  • Older employees retire sooner and have more complicated health concerns. [5]
  • The DoT’s mandate for electronic logs, effective 12/18/17, could push some drivers to retire rather than adapt.

Despite the efforts of trucking companies to attract and retain employees with signing bonuses, referral bonuses, increased pay and health benefits4, the shortage continues.

ACTION STEPS

Fuel suppliers are increasingly being asked to forecast fuel needs further in advance and pull more ratable volumes. Avfuel asks its customers to take some proactive steps to manage inventories to meet customers’ needs:

  • Order loads one to two weeks in advance. Then Avfuel can utilize the best combo of fuel terminal/trucking company for the best price, and better forecast supply and place nominations at ratable volumes. For special events/seasonal trends, advanced notice ensures increased volume is accounted for during fuel nominations.
  • Pre-order as far out as possible, regardless of market conditions. The evolving market will make ordering off of weekly pricing trends nearly impossible (and risky). It’s preferable to work from the top of your tanks and hold fuel in storage where you control it, rather than depending on a last-minute, costly delivery.  

Proactively working together to respond to fuel industry changes will enable us to mitigate the risks of higher prices, missed deadlines and fuel shortages. Avfuel is always available to discuss what these changes mean for you.



[1] EIA. (1 Jan. 2017). Number and capacity of petroleum refineries. EIA. Retrieved from https://www.eia.gov/dnav/pet/pet_pnp_cap1_dcu_nus_a.htm

[2] EIA. (31 May 2017). Refinery yield. EIA. Retrieved https://www.eia.gov/dnav/pet/pet_pnp_pct_dc_nus_pct_a.htm

[3] Gillespie, P. (1 Nov. 2016). Truck drivers are getting America’s biggest pay raises. CNN Money. Retrieved fromhttps://money.cnn.com/2016/11/01/news/economy/truck-drivers-wages/index.html

[4] Thomas, B. (27 Oct. 2016). Trucking industry driver shortage threatens American consumer lifestyle. Trucks.com. Retrieved fromhttps://www.trucks.com/2016/10/27/truck-driver-shortage-threatens-lifestyle/

[5] Surber, M. (3 Oct. 2014). Changing demographic of the American truck driver and what that means for recruiters. The Mile Marker. 


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