When a terminal says you are “on allocation,” ask how many gallons you can still lift, how many days are left, and whose tanks run dry first. This is the order a broker works it in. For what an allocation is, see fuel allocation.
How much allocation do you actually have left?
Start with three numbers per supplier, terminal and product: the allocation for the period, gallons lifted so far, and days remaining. Allocations are usually tracked by supplier, terminal, product and period. If any of the three is a guess, fix that first.
Then convert gallons left into days of cover: gallons left divided by the daily pace you need. If the cover is shorter than the days remaining, you have a shortfall to source.
Ask the terminal or supplier rep two more things while you are on the phone: whether lifts for loads already dispatched count against what remains, and whether the cap applies to the whole month or is pro-rated by week.
What does your contract promise?
Read the supply agreement before you call anyone, because it sets what you can demand and what you can only ask for. You are looking for:
- Ceiling or commitment. Does the supplier have to make the volume available, or is it only the most you may lift?
- Cuts. Can the supplier reduce it mid-period, by how much, and with what notice?
- Carry-over. Does unused volume roll forward, and does anything lifted over the cap get a different price?
- Terminal swaps. May the supplier, or you, move volume to another terminal?
- Who is on the contract. A jobber buying under its own contract and a broker arranging loads for others may hold very different rights.
Write down what you find. Counsel writing on fuel-supply disruptions recommend documenting fuel requirements, essential functions, inventories and substitutes, according to Gowling WLG. A record of what each customer needs is the same document you will use below.
What are your options for the shortfall?
There are three, and they are not equal:
- Another terminal under the same supplier. Usually the cheapest, if your supplier allows it. Check that your carriers are carded there, and expect more freight.
- A second supplier. Needs an existing relationship or a quick credit and paperwork check, and its price is whatever it quotes you.
- Spot. Usually available, at a premium to the rack that day. A broader shortage tends to widen it.
A worked example
Every number below is hypothetical. Say you hold a 300,000-gallon diesel allocation for the month at one terminal. On day 20 you have lifted 262,000 gallons, and 10 days remain. Your customers need about 9,000 gallons a day.
| Gallons | |
|---|---|
| Allocation left (300,000 − 262,000) | 38,000 |
| Needed for 10 days (9,000 × 10) | 90,000 |
| Shortfall | 52,000 |
| Days of cover on what is left (38,000 ÷ 9,000) | about 4.2 |
You then price the three sources:
| Source | Gallons available | Extra cost per gallon | Extra cost |
|---|---|---|---|
| Alternate terminal, same supplier | 30,000 | $0.02 (freight) | $600 |
| Second supplier | 0 on the day | not available yet | none |
| Spot | any | $0.08 over contract | $1,760 on 22,000 gallons |
The alternate terminal covers 30,000 of the 52,000. Spot covers the other 22,000 at $0.08, or $1,760. The total extra cost is $2,360, about 4.5 cents a gallon across the 52,000 gallons.
The second supplier does not help today because nothing is set up. If it had been, you would price it against spot. The time to build that relationship is before the cap.
Which customers get covered first?
Rank customers by days of cover in their tanks and by what you have promised them, not by size. Three hypothetical customers:
| Customer | Tank cover | Commitment | Plan |
|---|---|---|---|
| A | 1.5 days | Scheduled delivery, contract price | First load from the allocation left |
| B | 6 days | Scheduled delivery | Allocation or alternate terminal, within the week |
| C | 12 days | Will-call, no committed volume | Alternate terminal or spot, last |
Move the longest-cover, least-committed customers onto the more expensive sources and tell them the delivered price changed before you load. Whether you can pass the premium on depends on the customer’s agreement with you, so check it. If the extra $2,360 comes out of your own spread, you want to know that on day 20, not at month end.
How do you avoid being caught next month?
Check allocation left weekly, not at month end, and flag any product where cover drops below the days remaining. Keep a second supplier’s credit and terminal paperwork current even if you buy nothing from them, and keep a list of which carriers are carded where. When a large new account comes on, ask the supplier about raising the allocation before the first load, because history-based allocations lag growth.
How Energy Connect handles it
In the broker portal, see your margin (sell price minus buy price, times gallons) on delivered, completed and invoiced loads that have both prices recorded. Break it down by product or by customer, and export it to CSV.