To Help Gas Prices Go Down, Maybe We Just Need to Buy More Gas

Make room for lower-price fuel at FBOs' fuel farms.

With prices for automotive gas plunging at the pump, pilots might be forgiven their impatience with prices they are continuing to pay for aviation fuel -- be it 100LL or jet-A. But it's not necessarily price gouging by the FBO. The volume of general aviation fuel produced and sold represents a tiny drop in the bucket when compared with how much car gas is produced. And that leads to some pricing dynamics that have little relationship to what we pay to fill up our four-wheelers. For example, while the corner gas station might replenish its storage tanks several times a week, an FBO at a relatively sleepy airport could go a month or more between deliveries. So with the rollercoaster we've seen lately on oil prices, setting retail fuel prices down at the airport can be a tricky balancing act.

On one hand, FBO managers need to base their posted retail price on the wholesale figure they paid for the fuel when it was delivered; but they also need to consider their cost to replace that fuel. If they bought low and prices skyrocket, they could be in for windfall profits; until they have to call the supplier to reload. Conversely (as is the case these days), when an FBO buys a truckload of fuel at prices based on $140-per-barrel oil, it takes a gutsy move to lower retail prices to well under wholesale level on the fuel that remains in the tanks. What if wholesale prices soar again in the weeks it takes to empty the fuel farm? Then it becomes a CFO's nightmare of buying high, selling low, then being forced to buy high again. So if we want FBOs to lower prices, maybe we should just buy more fuel, more often, so their selling price can better reflect their day-to-day wholesale investment.

Most FBOs will smooth out the pricing spikes and delay adjusting their retail prices upward when they still have low-cost fuel to sell. Likewise, they are often slow to reduce their retail price for fuel when prices are on the way down. It would be naïve to believe that some FBOs don't leverage the fluctuating prices to pad their margins. And for many (if not most) FBOs, fuel profits drive their entire bottom line and therefore must offset increased overhead in other areas, such as insurance, rent and personnel costs. But most are sensitive to exactly what their customers are showing these days -- an ingrained notion that aviation fuel ought to follow the ups and downs they see on their automotive fuel prices.