If you want to start a fuel distribution business, decide first how you will buy fuel, before the company name or the truck. That choice sets how much credit you need, who can sell to you, and where each cent of margin comes from. Many checklists list the steps without the order or the numbers. This guide puts the steps in the order you will hit them, and shows the arithmetic for a first load.
A fuel distributor buys fuel and resells it. Many people also say fuel jobber. The two words overlap heavily; the jobber entry covers the difference.
What are the ways to run a fuel distribution business?
There are three common models, and they differ mostly in what you buy, from whom, and what you must prove before anyone sells to you. Individual suppliers set their own terms, so read the table as a general framing.
| Jobber buying at the rack | Contract or branded distributor | Delivery-only (hauling for a supplier) | |
|---|---|---|---|
| Supply source | Terminal rack, under a supply contract or open purchase | Supplier or refiner contract, often tied to a brand | None: a supplier or jobber owns the fuel and pays you to deliver it |
| Credit needed | High: you pay for fuel before your customer pays you | High, plus brand and image obligations | Low: the fuel is not yours |
| Who owns the truck | You, or a contracted carrier | You, or a contracted carrier | You (your trucks are the business) |
| Where the margin comes from | Rack to resale spread, minus freight and credit cost | Resale spread over the contract price, plus any incentive in the contract | Delivery fee or per-gallon haul charge |
| Main risk | Price moves between purchase and sale | Contract volume and brand terms | Utilization of the truck |
The EIA defines rack sales as wholesale sales of gasoline, a truckload or smaller, where title transfers at a terminal, and dealer tank wagon sales as wholesale sales of gasoline priced on a delivered basis to a retail outlet. Both definitions are written for gasoline, but the distinction carries over: at the rack you take the fuel and arrange delivery yourself; on a tank wagon basis the seller prices it delivered.
What order should you do things in?
Do the buying-side steps before you spend on trucks, because a supplier who will not extend credit ends the plan whatever else you have lined up.
- Pick the model. Use the table above. If you cannot fund the credit a rack buyer needs, a delivery-only model or buying from an existing jobber may be your real starting point.
- Open a supplier credit account. Expect the supplier to ask for financial statements and trade references, and to set your credit line from the volume you plan to buy. Fuel is often paid for before your customers pay you.
- Get your state fuel licenses and tax registrations. See the section below. Terminal operators and suppliers may require proof of licensing and registration before they will sell to you. Confirm with each.
- Get carded. A carrier that is not carded at a terminal cannot load there, so the terminals your carrier is carded at limit where you can buy.
- Secure supply. Your contract sets how much you may lift per terminal, product and period. That limit is your fuel allocation, and in a tight market it is what you actually have to sell.
- Line up delivery. Use a contracted carrier or your own trucks. If you run your own, the carrier authority, insurance and driver requirements are a separate project: see the guide to starting a fuel hauling business.
- Price your first load from the rack. Build the price up from cost, as in the next section.
- Set credit terms for customers. Decide who gets net 10 or net 30 before the first invoice, not after the first late payment.
For finding trucks without owning any, see fuel tanker load boards.
How do you price a first load from the rack?
Start from the rack price, add your contract differential and freight, and compare the total with what you can sell for. For how suppliers build the price that sits above the rack, see wholesale fuel pricing for suppliers. The numbers here are hypothetical and exclude taxes on both sides, so check how your state and contract treat them.
Say you buy an 8,000-gallon load and pay the supplier 10 days after loading, while your customer pays on net 30 (20 days of carrying). Assume financing costs 8% a year (also hypothetical).
| Line | Per gallon | On 8,000 gallons |
|---|---|---|
| Posted rack price | $2.4800 | $19,840.00 |
| Contract differential | $0.0150 | $120.00 |
| Product cost | $2.4950 | $19,960.00 |
| Freight to the customer’s tank | $0.0600 | $480.00 |
| Delivered cost | $2.5550 | $20,440.00 |
| Sold to the customer, delivered | $2.6400 | $21,120.00 |
| Gross margin | $0.0850 | $680.00 |
| Cost of carrying credit (20 days at 8%) | $0.0109 | $87.50 |
| Margin after credit cost | $0.0741 | $592.50 |
Arithmetic: $2.48 + $0.015 = $2.495. $2.495 + $0.06 = $2.555. $2.64 - $2.555 = $0.085. $19,960 x 8% x 20 / 365 = $87.50 (per-gallon figures rounded).
The 8.5-cent gross margin is 7.4 cents once you pay for the credit you extend. And a 1.5-cent move in the rack between pricing the customer and loading takes about a fifth of the 7.4-cent margin. That is the price risk a jobber carries. For the same spread seen from a broker’s side, see how fuel brokers get paid; for the freight line, see fuel hauling cost per gallon.
If you sell delivery only, the same table collapses: you have no product cost or credit line, and your margin is the haul charge less truck cost.
What do you need to verify with your state?
Verify fuel licensing, bonding and tax registration with your state’s fuel tax agency before you buy your first load, because requirements differ by state and this post does not state them. Tax is not a small line. The EIA reports that the federal tax on on-highway diesel is 24.40 cents per gallon, and that as of January 2026 state taxes and fees for on-highway diesel averaged 35.86 cents per gallon. Together that is several times the margin per gallon in the example above, so who collects and remits them in your contracts matters.
Ask each question in writing:
- Which license or permit does a company that buys and resells fuel need in each state you will sell in?
- Who is the taxpayer on a rack purchase: you, or the supplier on your behalf?
- Is dyed fuel handled differently, and are there rules on who you can sell it to?
- Do you need a bond, and in what amount?
Federal excise tax registration is also its own step: the IRS publishes Form 637 as the application for excise tax registration for certain activities. Ask a tax adviser or the IRS whether your activities require it.
Where do new distributors get stuck?
The usual failure is a gap between the paperwork and the cash. Supply and credit approval take time, and terminal access depends on both. Once you have picked a model, open the supplier account before spending on trucks, run licensing in parallel, and quote customers only once you know which terminals you can load at.
A second trap is selling a fixed price against a floating rack. If you quote a customer a price good for a week and buy on the day, you carry the movement. Quote from today’s rack plus a margin, or know what you are risking.
How Energy Connect handles it
This post is general guidance. It does not describe any Energy Connect feature. If you are building a distribution business, start with the table and the worked load above: pick a model, size your credit, and price from the rack up.