by John Keller | Oct 1, 2014 | Fuel Price Management, Fuel Pricing Strategy, Fuel Pricing Technology, Fuel Software, Industry News
The October issue of NACS Magazine has a great article “Weathering the Storm” discussing how weather impacts both fuel and in-store sales. Perhaps the best quote in the article is this: “As a stand-alone discipline, focusing on weather impact seems perhaps overstated, but as part of an overall retailing strategy it is essential, especially when it comes to reinforcing your brand’s value.”
The importance of incorporating weather into your fuel pricing strategy is a concept we at PriceAdvantage have embraced for a long time. It is in this vein that PriceAdvantage offers a free weather widget that not only shows current weather conditions at the store location, but a six day forecast, and a three day weather history as well. Ice storm in the forecast for Dallas? Prepare for virtually no traffic on that day. Nor’easter predicted to hit Boston this weekend? Plan on increased traffic exiting the city for home ahead of it, and increased skier traffic to the mountains after it.
Weather is a critical aspect of retail fuel pricing that makes optimization economic models on their own simply not good enough. Economic models are based on all things being equal. Introduce a random major weather event, and suddenly all things are not equal. Successful retail fuel pricing strategies must incorporate the wisdom and insight that only the fuel analyst and field intelligence can provide. That’s what we mean when we describe the “art and science” of fuel pricing.
NACS board member Chris Gheysens says in the article “It’s time to see weather as an opportunity … Understand what it does to you and solve for it going forward, coming up with different strategies.”
by John Keller | Sep 29, 2014 | Fuel Price Management, Fuel Pricing Strategy, Industry News, Retail Fuel Margins
On the online Convenience Store Decisions site today there is an excellent article written by Brian Milne, the Energy Editor of Schneider Electric. In the article Mr. Milne outlines the various factors influencing the expected price of gasoline through the rest of this year. Here is the list of influences going on right now:
Downward pressure:
- Seasonal decline in demand from August to September, as expected every year
- The move to a higher Reid vapor pressure specified gasoline, which is less costly for refiners to produce
- Growth in global crude production from the US, the North Sea, Libya, and Iraq
- Slowing growth in the China economy means weaker demand
Upward pressure:
- Refinery outages in the Gulf Coast and eastern Canada which supply the US Northeast
- The world traditionally uses the most oil during the fourth quarter leading to increased demand
Mr. Milne concludes that the only certainty in gas price predictions is the uncertainty. While it remains a safe bet that retail fuel prices will continue to decrease through the end of 2014, it may not be to the low levels that some predict. And from a fuel price management perspective, whenever we say declining retail fuel prices, we can insert rising retail fuel margins, since the opposite trends go hand in hand.
by John Keller | Sep 26, 2014 | Fuel Price Management, Industry News, Retail Fuel Margins
The OPIS report today revealed that the average retail fuel margin across the US dipped $0.026 to $0.241 per gallon. That is $0.041 per gallon below the equivalent week last year. However, the retail fuel finished up $0.03 per gallon since the beginning of September.
The third quarter average finished at a strong $0.240 per gallon, compared to $0.169 in Q2 and $0.158 in Q1. In 2013 the average for Q3 was $0.207 per gallon across the US.
From a fuels pricing perspective, a strong quarterly margin paired with a traditionally strong volume quarter means retail fuelers had a profitable quarter. We should look for that in the financial results that come in the next few months.
What can we expect in the remaining part of the year? Looking back to 2013, we saw October finish only $0.006 below the start of the month. But the outlook is for falling prices this year, with some calling for many states to dip below $3.00 per gallon, and traditionally when we see falling prices, we see rising margins. Let’s hope so.
by John Keller | Sep 20, 2014 | Fuel Price Management, Industry News, Retail Fuel Margins
According to the latest OPIS report, the average retail fuel margin across the US had the highest weekly jump since January. The average retail fuel margin jumped $0.061 per gallon this week, and now stands at $0.267 per gallon. That is the highest margin average since August 1 this year.
The year to date average increased slightly to $0.188 per gallon, and the Q3 average increased to $0.239 per gallon. The six week average is now $0.223.
The current retail fuel margin is now $0.027 per gallon higher than last year at this time.
With one week remaining in the quarter this year, it’s certain we’ll have the highest quarterly retail fuel average in Q3, compared to Q2 and Q1.
by John Keller | Sep 15, 2014 | Fuel Price Management, Fuel Pricing Strategy, Fuel Software, PriceAdvantage, Retail Fuel Margins
Brian Milne, Energy Editor for Schneider Electric, contributed another excellent update on Convenience Store Decisions today.
From a fuel price management perspective, the key takeaways are as follows:
- Brent crude oil dropped into the mid $90s bbl, below $100 bbl for the first time in over a year.
- West Texas Intermediate traded at $90.43, the lowest since May 2013.
- Retail fuel prices are likely to drop as much as $0.25 or more over the next 6-8 weeks.
We know that with the summer travelling season behind us, the annual seasonal trend should show us lower volumes from here through the end of the year. If Mr. Milne’s prediction holds true, and retail fuel margins increase as retail fuel prices drop, we’re heading into a season of strong retail fuel margins through Q4. In 2013, retail fuel margins hovered in the $0.188 to $0.191 range throughout the fourth quarter, and we didn’t see such margin increases. Hopefully 2014 will prove to be more profitable.
