The Difference between Cost-Plus and Retail-Minus Fuel Savings

Fuel Savings

In trucking, there are two key ways to save money on diesel fuel: “cost-plus” and “retail-minus.” Which approach will save your company more money? The answer depends on market conditions and what parts of the country your fleet serves.

With the retail-minus pricing structure, drivers pay the posted pump price at a fuel stop. That retail price includes the cost of the fuel, taxes and a retail margin covering all expenses of doing business. The “minus” is the negotiated rebate that your fuel card provider pays you later on gallons you purchase.

With the cost-plus model, you do not pay the retail price. Your driver pays a rack price based on the Oil Price Information Service (OPIS) nationwide index, plus state and federal taxes. Added to this is a fixed fee set independently of the station’s pump price.

The Retail-Minus Model

Station Rack Price
+ State and Federal Taxes
+ Transportation Costs
+ Margin
- Rebate
= Total Retail-Minus Price

The Cost-Plus Model

OPIS-Based Rack Price
+ State and Federal Taxes
+ Transportation Costs
- Cost-Plus Fee
= Total Cost-Plus Price

Which One is Better?

Which approach saves more money depends on retail margins and where your fleet fuels up. In places like California or Hawaii where the cost of transporting fuel to retailers is more expensive, cost-plus usually saves more money. In areas like the Gulf Coast where fuel is cheaper and the margins thinner, retail-minus is usually the better option.

One benefit of retail-minus over cost-plus is that its pricing is more transparent. There is little explanation as to how cost-plus OPIS index prices are set or why they are changed. With retail-minus, the pump price remains the pump price. Fleet managers that operate nationwide usually generate more savings with the retail-minus model.

Sources: WEX Inc., FTI Consulting