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Frequently Asked Questions

THE SIX MOST COMMON QUESTIONS ASKED ABOUT RAILROAD FUEL CONSULTANT'S FUEL MANAGEMENT SYSTEM FOR RAILROADS

Q. HOW CAN I PREPARE LOCOMOTIVE FUEL COST BUDGETS THAT ARE BASED UPON ACCURATE AND TIMELY INFORMATION.                              

A. Pay attention to the cost components, unique to each railroad, the total of which must be compared to the futures markets. This relationship to the diesel futures markets become the foundation for your budget preparation and fuel price hedging program.                                 


Q. HOW OFTEN SHOULD I REVISE MY FUEL FORECASTS AND BUDGETS?           
A. Timely reviews of budgets will vary between rail groups, depending upon accounting procedures and shareholder reporting requirements. 
                      


Q. HOW CAN I ASSURE MYSELF THAT MY PURCHASES WILL BE AT OR LOWER THAN MY FUEL BUDGET?
A. This is a difficult assignment and one that can be very elusive.  The accuracy of your fuel budgets can be undermined by multiple outside economic forces that are directly associated with or perceived to be associated with crude oil and petroleum product supply availabilities. 

 

Q. HOW CAN I USE THE FUTURES MARKET TO HEDGE MY FUEL PURCHASES

AGAINST CATASTROPHIC INCREASES IN FUEL PRICES?
A. Once you have established the cost relationship of your fuel costs to the futures markets, a formal hedging plan should be established and approved by upper management or board of directors. You must then choose the desired method to be used to insure against your fuel price risks and select the financial managers to implement your hedging plans.

 

Q. HOW EFFECTIVE ARE FORWARD PURCHASE (FIXED PRICE) ARRANGEMENTS?
A. The primary element for effectiveness of fixed price purchase contracts is the "timing" of your entry into the agreement.  You must wait for the right entry or price level in order to insure satisfactory results with forward price arrangements.

 

Q. IS IT IMPORTNT TO KEEP UP WITH COSTS ASSOCIATED WITH EACH FUELING LOCATION FACILITY OR LOCATIONS?
A. In our opinion, the accurate continuous monitoring and documenting of fuel cost components are critical to the accuracy and success of any business plan for a railroad, its fuel cost budget and its fuel cost hedge program.

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