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Wholesale Fuel Pricing for Suppliers
A wholesale fuel price — a distributor’s or jobber’s pricing — is usually your cost basis plus a margin, quoted in one of a few standard shapes: rack plus an adder, a contract formula tied to an index, or a one-off spot price.
This guide works through those shapes from the seller’s side, with one set of made-up numbers carried all the way through, and ends with a table for deciding which customers get which. What a rack price is, and how it differs from an index price, is covered in the glossary.
Every number on this page is hypothetical
These inputs were chosen to make the arithmetic easy to follow. They are not market prices, typical margins or typical freight rates. The gap between the branded and unbranded rack is there to show the arithmetic and says nothing about the size of that gap in practice.
| Input | Value |
|---|---|
| Unbranded rack, at the terminal you lift from | $2.4150/gal |
| Branded rack, same terminal and product | $2.4650/gal |
| Your margin adder | 6.00¢/gal |
| Freight to the customer, if you deliver | 4.50¢/gal |
| Load size | 8,000 gallons |
How do you build a rack-plus quote?
Start from the rack price at the terminal the load will actually lift from, because that is what the product costs you that day. Add your margin as a fixed adder per gallon. If you deliver, add freight on top, either as its own line or folded into a delivered price.
| Step | Arithmetic | Per gallon |
|---|---|---|
| Rack (cost) | posted price | $2.4150 |
| Rack-plus, at the terminal | $2.4150 + $0.0600 | $2.4750 |
| Delivered | $2.4750 + $0.0450 | $2.5200 |
| Load total, delivered | $2.5200 × 8,000 | $20,160.00 |
The adder is the only number you negotiate. The rack moves every time the supplier reposts, and the customer’s price moves with it, so your margin per gallon stays where you set it. That is why rack-plus suits regular accounts: your margin is fixed, and the customer pays the day’s market price.
Two things to settle on the quote itself: which terminal’s rack it references, since racks differ between terminals, and the time the price is struck, since a rack can repost more than once a day. A customer comparing your quote with someone else’s will be converting both to a delivered cost per gallon, the way this buyer-side walkthrough does, so quoting it that way yourself saves a round of questions.
How do branded and unbranded quotes differ?
Where a supplier posts branded and unbranded product at separate rack prices, build each quote from its own rack. The adder can be the same for both. The cost basis cannot.
| Unbranded | Branded | |
|---|---|---|
| Rack | $2.4150 | $2.4650 |
| + adder | $2.4150 + $0.0600 = $2.4750 | $2.4650 + $0.0600 = $2.5250 |
| + freight | $2.4750 + $0.0450 = $2.5200 | $2.5250 + $0.0450 = $2.5700 |
| Load total | $2.5200 × 8,000 = $20,160.00 | $2.5700 × 8,000 = $20,560.00 |
The mistake to avoid is quoting a branded customer off the unbranded rack, or the reverse. In this example that is $2.4650 − $2.4150 = 5.00¢ a gallon, and 5.00¢ × 8,000 = $400.00 on one load, given away or overcharged without anyone choosing to.
What changes with a contract formula?
A contract price is often written as a published index plus a fixed differential, agreed for a term. Suppose the contract says index plus 9.50¢, and on day 1 the index is $2.3800:
| Arithmetic | Day 1 | Day 2 | |
|---|---|---|---|
| Your rack (cost) | day 2: +3.00¢ | $2.4150 | $2.4450 |
| Index | day 2: +1.00¢ | $2.3800 | $2.3900 |
| Contract price | index + $0.0950 | $2.4750 | $2.4850 |
| Rack-plus price, for comparison | rack + $0.0600 | $2.4750 | $2.5050 |
| Your margin on the contract | contract − rack | 6.00¢ | 4.00¢ |
On day 1 the contract and rack-plus land on the same price. On day 2 the rack rose 3.00¢ and the index only 1.00¢, so your margin on the contract fell from 6.00¢ to 4.00¢ a gallon while the rack-plus customer’s price simply followed your cost.
That gap is basis risk: the contract tracks the index, and your cost tracks the rack you lift from. When the two move together it costs nothing. When they diverge, you carry the difference for the whole contract term. Set the differential with that in mind, and check that your allocation covers the volume you are committing to, because a contract customer still expects product when your allocation runs out.
Rack price vs spot price: when does spot make sense?
Spot makes sense for occasional or one-off loads, where the buyer has no contract or allocation, and the margin only holds for the day it is struck. Spot here means a one-off sale outside any contract or allocation, priced for that load. A seller can price it off a published spot assessment plus a differential instead of off its own rack. With a spot assessment of $2.3500 and a differential of 14.00¢:
| Arithmetic | Per gallon | |
|---|---|---|
| Spot-index-plus price | $2.3500 + $0.1400 | $2.4900 |
| Your margin, against today’s rack | $2.4900 − $2.4150 | 7.50¢ |
You may want a wider differential here than on a contract, because you are selling volume you could have kept for a committed account. If the load lifts tomorrow at a different rack, recheck the margin.
Which customers get which pricing model?
There is no single right answer, but the choice usually follows from three things about the customer: how steady their volume is, how much price certainty they want, and whether they buy branded product.
| Customer | Model that usually fits | Who carries market risk | What to check first |
|---|---|---|---|
| Regular account, steady volume | Rack-plus | Customer | Which terminal’s rack, and the strike time |
| Branded station | Branded rack-plus | Customer | The brand agreement, and that the quote uses the branded rack |
| Large account wanting budget certainty | Contract formula (index + differential) | You, for the rack-to-index basis | Allocation for the committed volume; how far your rack and the index have diverged before |
| Occasional or new buyer | Spot, per load | You, for that day only | Credit, and whether the volume crowds out committed customers |
| Reseller or jobber | Rack-plus | Reseller | That they lift where your rack is posted |
Whatever the model, write the basis on the quote: which rack or index, which terminal, branded or unbranded, gross or net gallons, and whether freight and taxes are included. A quote that leaves one of those unstated is the one that turns into a dispute later.
How Energy Connect handles it
Suppliers keep their rack prices in the supplier portal by terminal and product, and each price can be marked branded or unbranded. Prices arrive by importing the OPIS, DTN, Platts or Argus files you already receive or a price sheet in a supported layout, or are entered in the portal. An imported sheet stays private until you publish it to your connected accounts.
See the supplier portal for the rest of the workflow, and pricing for plans.
Sources
- FTC, Gasoline Price Changes and the Petroleum Industry (2011): contract prices set against widely recognised spot or futures prices
- EIA glossary: spot price: a one-time open-market transaction for near-term delivery
- CFTC glossary: basis risk: the risk that the basis widens or narrows unexpectedly