Fixed or Floating?

Here’s a question that’s keeping procurement managers up at night this month: do you lock in your fuel price now, or ride the market and hope it comes back down?

It’s not a small decision. Get it right and you protect your margins through a brutal stretch. Get it wrong and you’re either overpaying for months on a fixed deal that aged badly, or watching a floating contract blow a hole in your budget every time a headline hits.

And right now, the headlines are hitting hard. So, let’s talk through how fuel pricing contracts actually work, when to lock and when to float, and how to structure a deal that doesn’t leave you exposed. No jargon dumps. Just the stuff that changes what you pay.

Quick answer: Fixed pricing locks in one number for the life of your contract, trading upside for certainty. Floating, or index, pricing ties your price to a published benchmark plus a margin, so you pay the real market rate but absorb every spike. Short term and expecting prices to rise, lean fixed. Longer term and able to handle swings, lean floating. Either way, the biggest cost driver most buyers never see is how many brokers are stacking margin between them and the actual product.

First, Why Everyone’s Suddenly Nervous

If you’ve felt like fuel got expensive fast, you’re not imagining it.

Brent crude is trading around $89.61 a barrel, with WTI near $83.89. Both are riding a multi-day rally as the Strait of Hormuz, the chokepoint that normally carries about a fifth of the world’s oil, stays effectively shut. Before the crisis, roughly 120 vessels a day moved through it. Lately it’s been closer to eight.

But here’s the part that should really get your attention. Look at the range crude has covered in just the last twelve months. Brent has swung from a low near $58.72 all the way up to $119.40. That’s not a market. That’s a rollercoaster with your fuel budget strapped into the front seat.

And the people whose job is forecasting this stuff aren’t calling for calm. The U.S. Energy Information Administration just raised its 2026 Brent forecast to $87 a barrel, up from $82 a month earlier, and pushed its wholesale diesel forecast up 8.5% to $3.37 per gallon. They don’t expect Middle East production to fully recover until early 2027.

Translation: volatility isn’t a blip you can wait out. It’s the environment. And that makes how you price your fuel contract one of the most important calls you’ll make all year.

The Two Ways to Buy: Fixed vs. Floating

Almost every bulk fuel contract comes down to one fork in the road. You either lock a price, or you tie it to the market. Everything else is a variation on those two.

Fixed pricing

You agree on a set price, say, a specific number per gallon or per litre, and that’s what you pay for the life of the contract, no matter what crude does.

The upside is obvious: certainty. You can build a budget, quote your own customers, and sleep at night knowing a Hormuz headline won’t wreck your numbers next Tuesday. The catch is that suppliers price in a premium to cover the risk they’re taking on, and if the market drops, you’re stuck paying above it. You’ve traded upside for peace of mind.

Index, or floating, pricing

Instead of a fixed number, your price tracks a published benchmark, a recognized market assessment, plus an agreed margin. Something like benchmark price plus a set amount per unit.

The upside is transparency and fairness. You always pay the real market rate plus a known markup, and when prices fall, you feel it immediately. The downside is just as real. When prices spike, that’s your problem, and your monthly bill moves with every geopolitical tremor.

Here’s the honest summary:

Neither is better. They’re bets on different futures.

So Which One Should You Pick Right Now?

Short version: it depends on your term length, your risk tolerance, and honestly, your read on where this is heading. But a few rules of thumb hold up.

Lean toward locking a fixed price if you’re buying on a short horizon, the next three to six months, and you believe prices are more likely to climb than fall. With Hormuz still constrained and forecasters raising their numbers, a lot of buyers are deciding the premium for certainty is worth paying right now. If a fuel spike would genuinely hurt your business, certainty is a feature, not a cost.

Lean toward floating if you’re signing a longer deal, a year or more, you want a transparent formula you can audit, and your business can stomach the monthly swings. Over a long enough horizon, you tend to pay closer to the true market average, and you’re not handing a supplier a fat risk premium.

And if you can’t decide? You don’t always have to. Smart buyers increasingly use hybrids: a floating base with a collar that caps how high your price can go and floors how low it can drop, or splitting your volume so part is fixed and part floats. You give up a little upside to buy a ceiling. In a year like this one, a lot of people would take that trade.

The point isn’t that there’s one right answer. It’s that “we’ll just buy at whatever the price is that day” is the one strategy almost guaranteed to hurt you in a market this jumpy.

The Hidden Variable Nobody Puts In The Spreadsheet

Here’s what most fixed vs floating guides leave out. When you compare fixed price against benchmark plus margin, the number that quietly decides everything is that margin, and who’s stacking onto it.

Because in a typical fuel deal, you’re often not buying from the party that actually holds the product. You’re buying from a broker, who’s sourcing from another broker, who has a line to a supplier. Every one of those layers adds its own markup on top of the benchmark. Your transparent index formula is only transparent up to the first middleman. After that, it’s markups all the way down, and you have no idea how many.

So, you can negotiate the sharpest fixed price or the tightest index margin in the world, and still overpay, simply because three intermediaries each took a slice before the number ever reached you.

That’s why the smartest cost management move often isn’t fixed or floating. It’s cutting out the layers between you and the fuel.

Where Petrolodex Changes The Math

This is exactly the problem we built Petrolodex to solve.

We trade principal to principal, directly with you, with no broker chain and no daisy chain of intermediaries taking a cut. That single fact changes both sides of the fixed vs floating decision.

• On a fixed deal. You’re negotiating with the party that actually stands behind the fuel, not a middleman guessing at a price and padding it for their own risk. One counterparty, one number, one point of accountability.
• On an index deal. Benchmark plus margin means our margin, not our margin stacked on top of two other people’s margins. The formula is actually transparent, because there’s nobody hiding behind it.
• On cost, period. Removing the intermediary layers takes real money out of the deal before you even start talking structure. That’s margin that stays in your business instead of getting scattered across a broker chain.

We move fuel and oil across South America, EMEA, and Asia Pacific, from our tanks to your customers. So when you ask fixed or floating, you’re having that conversation with the principal, not with the fifth person to forward the same offer. That’s what makes the answer actually mean something.

The Bottom Line

Fuel prices are going to keep moving. That part’s out of your hands. What’s in your hands is how you buy.

Decide deliberately. Lock a fixed price if you need certainty on a short horizon and think prices are heading up. Float if you want transparency on a longer term and can ride the swings. Consider a collar or a split if you want some of both. But whatever structure you choose, strip out the middlemen first, because the cheapest contract in the world still costs too much if three brokers taxed it on the way to your desk.

That’s the real edge in a volatile market. Not predicting the price. Controlling everything around it.

Talk To Us: Trying to figure out the right fuel contract before the next spike? Talk to Petrolodex, principal to principal, no middleman, no stacked markups. Fixed, floating, or hybrid, you’re dealing directly with the people who hold the product. info@petrolodex.com

Frequently Asked Questions

What’s the difference between fixed and index (floating) fuel pricing?

Fixed pricing locks in a set price per unit for the life of the contract, giving you budget certainty but no benefit if the market drops. Index or floating pricing ties your price to a published market benchmark plus an agreed margin, so you always pay the current market rate, transparent and fair, but exposed to price spikes.

Should I lock in a fixed fuel price in 2026?

It depends on your contract length and outlook. Locking a fixed price makes sense on a short horizon (3 to 6 months) when you expect prices to rise or stay volatile, as many buyers do with the Strait of Hormuz constrained and forecasters raising their estimates. Floating tends to suit longer terms where you want transparency and can absorb swings. A hybrid with a price cap, or collar, can give you some of both.

What is a fuel price collar?

A collar is a hybrid structure on a floating contract that sets a maximum price you’ll pay (a cap) and a minimum (a floor). You give up some potential savings if prices fall in exchange for protection against a spike, useful when the market is highly volatile.

Why does buying fuel through brokers cost more?

In a typical broker or daisy chain, the offer passes through several intermediaries before it reaches you, and each one adds a markup on top of the benchmark price. Even a well negotiated fixed price or tight index margin can end up inflated because multiple middlemen took a cut. Buying principal to principal removes those layers.

What does principal-to-principal fuel supply mean for pricing?

It means you buy directly from the party that holds the product, with no broker in between. On a fixed deal you negotiate one accountable number; on an index deal the benchmark plus margin reflects a single margin rather than several stacked ones. Either way, removing intermediaries takes cost out of the deal and makes the pricing genuinely transparent.