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What Is Fuel Allocation?
An allocation is the volume of a product a supplier commits to make available to a buyer at a specific terminal over a specific period — usually a month.
It is not a purchase and not a reservation of physical inventory. It is a ceiling: how much a distributor is entitled to lift before the supplier is free to say no.
Why allocations exist
A terminal's throughput is finite, and demand is not evenly spread. Supply contracts therefore set out how much each buyer may lift, so a supplier can meet its obligations to everyone rather than serving whoever loads earliest.
Allocations are usually keyed on three things together: terminal, product and period. The same distributor can hold a different allocation for diesel than for gasoline, at the same terminal, in the same month — and a different one again at the terminal thirty miles away.
How allocations are set
Most are historical. A supplier looks at what a buyer lifted over a prior period and commits to something near that, adjusted for the contract and for the supplier's own position. Seasonal products move the number around: propane allocations look nothing in July like they do in January.
This has a consequence distributors feel every year. Because allocations are anchored to history, a distributor that grows faster than its allocation is renegotiated has to source the difference somewhere else — at spot, at another terminal, or from another supplier.
Running short
Two situations sit behind most allocation problems:
- Running out mid-period. A cold snap or a large new account consumes the month's allocation by the third week. The remaining loads have to come from elsewhere, usually at a worse price.
- Being cut. In a genuine supply disruption, suppliers reduce allocations across their buyers. Everyone is short at once, and spot prices move against you at exactly the moment you need spot volume.
The operational difficulty is rarely the policy. It is knowing, on any given day, how much of each allocation is left — across every supplier, terminal and product — before committing a truck to a load.
Allocation, contract and spot
| Term | What it governs |
|---|---|
| Allocation | How much you may lift. A quantity ceiling. |
| Contract | What you pay for it, often as an index or rack price plus a differential. |
| Spot | A one-off purchase outside either, at whatever the market is that day. |
A distributor can hold an allocation and still pay a contract price against it; the two answer different questions.
How Energy Connect handles it
Allocations are first-class records keyed on terminal, product and period, so remaining volume is visible at the moment a load is being planned rather than reconciled at month end. The natural key is immutable — changing which terminal or product an allocation covers means creating a different allocation, not editing one — so history stays auditable.