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Many more hydrogen fueling stations coming to California

California plans to increase the number of hydrogen fueling stations in their state from 9 to 109 over the next ten years, according to PetrolPlaza news. Governor Jerry Brown signed the bill committing $20 million per year to build out the hydrogen fueling infrastructure.

Plans are in place to have 12 new stations in California by early 2014, and there is already funding for seven more stations. Auto manufacturers acknowledge this commitment is critical to the adoption of hydrogen vehicles they plan to introduce in the coming years. Toyota says they are on track to deliver a mass production hydrogen vehicle in 2015. Hyundai also plans to lease 1000 hydrogen cars in the US in 2015.

While this doesn’t mean petroleum fuels are going to be dethroned as the highest volume fuel product offered by fuel retailers, it does mean that in certain markets, particularly in California, it may make sense to look into a hydrogen station as part of the c-store overall branding. At least it projects a progressive image, and hydrogen is certainly going to offer much higher margins than traditional fuels, given the lack of competition and market maturity.

Plug-in electric vehicles annual compounded growth projected to be 18.6% through 2022

Navigant Research has recently published a report projecting the annual compounded growth rate of plug-in electric vehicles at 18.6% through 2022, significantly higher than the projected growth of the light duty vehicle market. Four US states in particular are pegged as being the growth leaders in projected annual sales: California, New York, Washington, and Florida. Los Angeles, San Francisco and New York City are projected to have the largest sales of plug-in electric vehicles among all North American cities through 2022.

The study attributes the accelerating growth to the dramatic increase in plug-in electric vehicle options in the North American market. Where once it was a choice between the Nissan Leaf and the Chevy Volt, new mainstream choices include Tesla, Ford, Mercedes Benz, Toyota, Mitsubishi, Honda, and Fiat, with new offerings coming soon from BMW and Volkswagen.

When measured by percentage of overall vehicle sales by state, the highest concentration of annual plug-in electric vehicle sales is expected to be in Hawaii, California and Oregon.

Retail fuel managers competing in these states and cities need to be carefully monitoring the demand for electric charging stations, and consider a five to ten year plan that includes the electric charging station as a product offering. While liquid fuels are unquestionably destined to be the majority of fuels sales, ignoring the demand for electric charging could lead to consumers going outside the c-store market to re-fuel, and a loss of in-store revenue opportunities.

Retail Fuel Management issues span the globe

A team representing PriceAdvantage just spent the week at the Insight NACS Future of Convenience industry show in London. It was an exciting time for us because for the first time we were able to show off the international capabilities of PriceAdvantage, where we can now price fuel in any country, without constraint for gallons or liters, or number of digits to the left or right of the decimal. Where previously PriceAdvantage was only able to handle prices ending in nine tenths, PriceAdvantage can now price fuel to three digits to the right of the decimal, and unlimited digits to the left of the decimal. That means from now on PriceAdvantage is a powerful solution for any country in the world. In addition to this internationalization of the product, we were able to show off the first localized version of PriceAdvantage, fully translated into French.

But this tradeshow was exciting for us in another way as well. It became clear throughout the conference that the same problems PriceAdvantage addresses for our US customers are shared with c-store fuel retailers everywhere. As one speaker put it, there are no unique problems in the c-store business around the world, just the same problems in different parts of their lifecycle. Here are three examples.

1) Retail fuel volumes continue to decline year over year. According to the Belfast Telegraph, petrol sales continue to plunge, as much as 5.8% from January to June of 2013 compared to the same period last year. That represents a decrease of 512 million liters. Diesel fuel sales increased over the same time period, but only by 270 million liters, not enough to result in a net gain. The article attributes the loss to changes in consumer behavior to cut back on their driving.

2) Grocery chains and c-store chains are in a major battle for fuel volumes. This article in the London business newspaper City A.M. reports that supermarkets are in a fuel pricing war. The article goes on to say that the supermarket chain Sainsbury’s just cut their petrol prices by 6 pence and diesel by 4 pence in a battle with Tesco and Asda.

3) Fuel profit optimization is most powerful when viewed as part of the overall gross profits of the store. In many cases, the advertised fuel price is strategically used as an advertisement to attract customers to the high margin food and store merchandise product offerings. One speaker called fuel, merchandise, and food the three pillars of c-store profitability. As retail fuel managers learn about correlations between fuel volumes and in-store profits, and how these correlations vary depending on the markets in which they compete, the fuel managers can use fuel software to optimize volumes and margins based on differing market profiles and with an eye to overall store profits across all categories.

September 2013 represents a significant milestone for PriceAdvantage as it is our launch into markets outside the US. We will continue to introduce more capabilities for our customers around the world, providing a dramatic ROI in a short time frame, by solving industry problems no matter where they may be on the fuel management timeline.

When natural disasters strike

Fifteen months ago I wrote an article about natural disasters and fuel price management because the city of our home office was experiencing terrible forest fires. Since then another major section of the Colorado Springs metropolitan area suffered a forest fire, even larger than the fire of 2012.

I write this blog article to revisit the topic because the state of Colorado is now going through some of the worst flooding in its history, with many properties devastated, and lives lost.

From a fuels price management perspective, these Colorado floods are a significant disruption to the business of fuels management. Roads are difficult to travel, making it a problem to deliver fuel loads, and difficult for customers to travel. Demand for fuels in affected areas will unquestionably be low and possibly next to nothing. Some stores may even have to close temporarily.

In the future when we refer back to these days, it’s critical that your fuel software has the ability to annotate the special circumstances surrounding these business disruptions. PriceAdvantage provides an easy interface to add notes to the volume graphs for each day when the disruption can be recorded for future reference. Then in comparison analysis views, it’s easy to recall the reason why there are such glaring anomalies in fuels volumes.

Total US fuels volumes continue to shrink

Both the US Energy Information Administration and the University of Michigan continue to release information about the downward trend of US fuels volumes. The conclusions have a direct impact on the c-store retail fuels marketer because both the US EIA report and the University of Michigan study reveal a continued decrease in the overall retail fuels market size.

The US EIA reports that in 2012, US drivers consumed 50,000 barrels a day less gasoline than in 2011. And in the first half of 2013, US drivers have cut back again, consuming 50,000 barrels a day less gasoline than in 2012. While the US economy continues to improve in 2013, the improved fuel efficiency of vehicles on the US roads more than offsets any expected increase in fuels volume consumption.

According to the University of Michigan study, the average fuel efficiency of new vehicles sold in the US is now at an all-time high, reaching 24.9 miles per gallon in August. The average fuel economy of 2013 year model vehicles that were sold from October 2012 through August was 24.7 mpg. That makes for an increase of 1.2 miles per gallon above the 2012 year model vehicles. The average fuel economy of new vehicles has increased 19.7% since 2008.

How does this pertain to fuel management? While markets will vary based on population shifts, it is critical that fuel marketers continue to compare their current fuel volumes to six week trends, and year to date trends to last year. Fuel software must provide rich analysis that provides answers quickly so fuel pricing strategies can be continually adjusted. Our customers agree, PriceAdvantage analytics are the best in the business.

Retail fuel margins dip again

According to today’s OPIS report, retail fuel margin averages across the United States fell for the second straight week. This week retail fuel margins decreased $0.018 per gallon and now stand at $0.169 per gallon.

The year to date average dipped slightly to $0.181 per gallon. The Q2 average also slipped, to an average margin of $0.199 per gallon. The six week average stands at $0.203 per gallon and the average margin since Memorial Day is $0.204.

Retail margins this year are $0.025 per gallon higher than this time last year.

With the Syrian conflict in all the news and the rising cost of crude, there was fear of tanking retail fuel margins heading into the Labor Day holiday, but it looks like the c-store retail industry will be able to survive this weekend with reasonable margins and head into the next season with a solid year to date margin average.