How REL Changed the Fuel Game Overnight

Cost plus zero. With those three words, REL ended the fuel price war by going nuclear. REL negotiated cost plus zero pricing (i.e. wholesale diesel pricing) at most TAs and Petros - about 280 locations across the U.S. During the aftershock of that message, FedEx announced that Pilot/FlyingJ had come to the table and offered cost plus zero as well. And the net result is the best thing that’s happened to TSPs in a long time.

To understand the impact of REL’s move you need to go back to late 2021. As a TSP, your best option for fuel back then was to fill up your tanks at any of the 86 FedEx fuel islands scattered around the country. You could buy fuel there at wholesale prices thanks to FXG. Yes, there were problems – your drivers had to disconnect, the lines could be long and the pumps might be down. But at wholesale cost, it meant saving up to a dollar per gallon, and those numbers can add up.

But what about when your drivers can’t get to a FedEx fuel island? There are only 86 of them across the country. What if you had a team crossing the country and not stopping at a FedEx fuel island between Sacramento and Scranton? What if you had a solo run that couldn’t stop at any FedEx fuel islands? You were hurting every time your truck filled up at a retail location. The difference was coming out of your pocket, and for a team truck, that could easily be north of $600 per week per truck. That’s $30,000 per year per truck. Big money - right out the window.

Third-party fuel cards tried to address this need. They offered 30 or 40 cents off per gallon at select locations. That certainly helped, but those cards brought new challenges, like smaller networks, credit applications, administrative fees, separate bank drafts, having to upload receipts each week into MyGroundBiz, needing two fuel cards in trucks because the third party cards wouldn’t work at the FedEx fuel islands, IFTA tax reporting headaches... And in a time when retail vs. wholesale spreads were 80 to 100 cents per gallon, getting 30 to 40 cents off retail still left a big hole in your pocket.

Then in November 2021 REL made a “wow” announcement: they negotiated cost plus 17 cents with TA/Petro for all their lease customers on their card. And their fuel card was a T-Chek card, which meant it was integrated into the same system as the FedEx T-Chek card. No more uploading receipts. No credit application. No separate bank drafts. No extra fees. The purchases flowed through your settlement and your fuel tax reporting just like a FedEx T-Chek card purchase. And you could use the REL card at FedEx fuel islands, so only one card was needed in the truck. Instead of leaving 50 to 60 cents per gallon on the table, REL shocked people with 17 cents above wholesale.

We asked Pat McKay, CEO of REL, how they were able to get such an aggressive discount from TA/Petro, and he said:

"We’ve known TA for eight years in previous roles and have always had a very good relationship with them. When we sat down with them in 2020 to discuss our vision for REL and our passion for driving costs down for our customers around all facets of the truck, we advised them we would be going after a fuel program. At that time, TA had very low share of the FXG TSP retail fuel spend – I think less than 5% – and so they were on board immediately. It actually took us longer to get the IT and data file stuff right than it did for TA to come to the table at cost plus 17 cents."

Note for those who don’t understand how FXG reimburses for fuel: Yes, FedEx pays you for fuel, but that reimbursement rate is pegged to the wholesale cost of fuel. So, if you fill up at a FedEx fuel island, you’re in good shape, but if you buy fuel at a retail location, and for example pay $5 a gallon while the wholesale cost is $4.20, that extra 80 cents per gallon is coming out of your pocket. FedEx isn’t reimbursing you for the additional 80 cents above wholesale cost. The amount of unreimbursed fuel can add up quickly each week.

It turns out they were just getting started. In September 2022, REL opened up their fuel card to ALL FedEx TSPs, not just their lease customers. In October 2022, REL went back to TA/Petro and showed them the numbers and said, “Imagine the volume you could do if you went to cost plus zero.” The discussions were certainly more complicated than that, but whatever they said worked.

On November 11, 2022, REL announced that they reached a new agreement with TA/Petro for cost plus zero (wholesale) pricing at TA/Petro. This was a game-changer. Now you could have a single T-Chek card in your truck, your drivers could buy wholesale fuel at FedEx or any of the TA/Petro locations, and you didn’t have to worry about losing money at the retail pumps. For many contractors this meant thousands of dollars per week going straight to their bottom line, and “wow” became “holy s&!#!”

Tyler Tattum, COO of REL, explained it best (and more appropriately) when he said:

"Our ‘core’ focus with REL was to provide TSPs with solutions that save them time and money, so we knew we had an opportunity to help our customers navigate these trying times, and we realized that addressing this huge fuel challenge could have a massive impact for all FedEx Ground TSPs. We had the expertise and relationships to make this happen, and TSPs didn’t, so we decided to step up and make a difference for all TSPs, not just our customers. Fuel is just one example of how REL is focused on saving all TSPs time and money in their everyday operations."

And it got better. Two months after REL’s announcement, FedEx announced that Pilot/FlyingJ had come to the table and were now offering cost plus zero at their 750+ locations around the country. REL gives all the credit to FedEx for the Pilot/FlyingJ deal. And that’s fair. But we’re pretty certain that Pilot/FlyingJ wouldn’t have come to the table if REL hadn’t gone nuclear with the price war.

Now, because of the way the REL fuel card was tied into T-Chek, it means you can tell your driver you don’t care if they fill up at FedEx, TA/Petro or Pilot/FlyingJ because you’re getting wholesale pricing at all of them and getting points at TA/Petro and Pilot/FlyingJ.

Rock bottom fuel prices and points to make drivers happy. Nearly 1,100 combined locations around the country to get cost plus zero fuel. Total game changer.

When we last checked on the progress of the REL fuel program, they’d issued 5,200 fuel cards to TSPs. Considering there’s no cost to TSPs to participate, it’d probably be safe to say that, before the end of ’23, they’ll be closer to 8,000 cards issued. To date, they’ve helped TSPs buy 6 million gallons of fuel at these discounted prices, saving the TSP community approximately $5 million in just four months.

Pat explains:

"We saw something that didn’t sit right with us. We knew the power of fuel and that the pricing given to FXG TSPs in the retail market was in no way fair to the number of gallons they were buying. We felt we needed to help fix that. We’re thrilled that TA/Petro took the first step and hope our customers continue recognizing that by growing gallons with them. For our part, REL will continue to focus on improving costs for our customers and innovating new products that provide core needs at great pricing."

For all those TSPs using the REL fuel card, you know where to send the thank you cards. For those of you who aren’t, what on earth are you waiting for?