by John Keller | Feb 7, 2013 | Fuel Price Management, Fuel Pricing Strategy, Fuel Pricing Technology, Industry News
According to a new University of Michigan study, new vehicles sold in the US have a record miles per gallon rating, reaching 24.5 mpg. That is a full 1 mpg increase from January 2012, 2 mpg increase from January 2011, and 4 mpg increase from January 2008. A month by month detailed table can be found here.
Last month I wrote a summary of the US Energy Information Agency January report, where the USEIA explained that the primary cause for ongoing decreased fuels consumption in the US is increased auto fuel efficiency. This Michigan study correlates well to that study, and in combination, the two studies help us predict the future of US retail fuel sales volumes – we can expect lower volumes this year than last.
From a fuel pricing strategy standpoint, we can anticipate an increasingly competitive fuels market, as the overall fuels volume pie continues to shrink. The practice of fuel price management is not for the weary, and requires careful attention to monitor margins and volumes store by store, market by market, with a well executed fuel pricing strategies plan.
by John Keller | Jan 23, 2013 | Fuel Price Management, Fuel Pricing Strategy, Fuel Pricing Technology, Industry News
IGS is an independent retail supplier of natural gas, and a company with a vision of an energy independent United States. They now plan to build a network of CNG (compressed natural gas) fueling stations along I79 from West Virginia to Pennsylvania. IGS plans to finish this first corridor by the end of 2013, and continue to expand with more stations into the future.
IGS touts the main advantages of CNG fueling stations as 1) less expensive fuel than gasoline or diesel, and 2) refueling time is about the same as traditional fuels.
According to the US Department of Energy, there are now 558 CNG fueling stations in the US, excluding private stations. That is the fourth most common alternative fueling station behind electric, propane, and ethanol. But CNG expansion continues to be in the news, with municipalities announcing conversions of their fleets to CNG, announcements of more CNG fueling station networks being built, and auto manufacturers announcing the availability of stock CNG versions of their vehicles. It could be that 2013 becomes the year of CNG, laying the groundwork for a tipping point where we see a rapid increase of CNG vehicles on the road.
From a fuel price management standpoint, CNG presents another indicator of the overall traditional fuels volume pie shrinking, and the potential opportunity of a whole new fuels market for the taking. Which c-store chains will be the pioneers in this new opportunity, and which will follow?
by John Keller | Jan 22, 2013 | Fuel Price Management, Fuel Pricing Strategy, Retail Fuel Margins
The latest OPIS report shows that retail fuel margins increased for the second straight week, this time by $0.025 per gallon. The national average retail fuel margin is now $0.171 per gallon.
The average retail fuel margin for 2013 now stands at $0.148 per gallon.
From a fuel price management and fuel pricing strategy perspective, this is welcome relief to the margins we were dealing with at the turn of the new year. Current margins are now settling in to what NACS calls typical fuel margins for an overall one year period.
by John Keller | Jan 8, 2013 | Fuel Price Management, Fuel Pricing Software
A closed loop system uses feedback from the output to affect the input. In modern fuel price management, the application of a “closed loop” system is a highly effective approach to maximizing fuel revenue margins.
Fuel Pricing Factors
There are many factors involved in calculating price changes for fuel. Survey information, changes in existing volume, margins, and environmental factors can all contribute toward price shifts. A lack of integration between fuel price management software and physical sites will lead to ineffective pricing. The practical way to make fuel price changes in the modern world is through application of a “closed loop” system, wherein all processes are handled within the same channel.
Given the volatility of gas prices over the past few years, installation of a single-channel pricing system has become vital. Coordinators should take care that the crucial steps involved in fuel price management can be coordinated easily. PriceAdvantage software makes this coordination simple. Managers can collect the aforementioned data such as surveys and margins which affect prices, analyze this information via real-time multi-source intelligence, change the prices offered and listed at all of their sites, and receive automatic confirmation that these pricing changes have completed.
A Fuel Price Management Example
A good example of the effectiveness of implementing practical fuel price management solutions is The Spinx Company. This company today uses a closed loop system which allows their employees to change fuel prices with just a few clicks at their personal kiosk, or from the corporate office. This eliminates interference from weather or high customer traffic and enables sites to update gas prices with a cost-effective and reliable system.
“We can move very quickly as costs change,” says Stewart Spinks, CEO of The Spinx Company, “some suppliers do multi-day changes. Central cost monitoring and speed of price changes can ‘signal the street’ of our desire to pass on increases or decreases to the market. If competitors don’t react within two hours, Spinx can react expediently. Furthermore, the staff does not have to stop serving customers to physically go ‘post the prices.'”
Customizable LED signage, when integrated with fuel pricing software, gives sites the ability to far exceed local competition with pricing that quickly reacts to changing market conditions. As consumers demand higher quality and green energy efficiency from their fuel providers, closed loop fuel price management solutions with LED signs enable companies to consistently meet customer expectations. This quality, integrated fuel management technology attracts more customers and drives revenue with increased visibility. The Spinx Company saw such success with their closed loop system that approximately 75 percent of their newly branded stores are shifting to this customizable LED signage as part of their fuel pricing strategy.
Looking Forward
Replacing outdated systems with electronic price signs and integrated message centers is the first, crucial step toward joining the world of tech-savvy fuel price management experts. These systems allow marketers to change prices with greater reliability and speed, increase customer attention at all of their locations, react quickly to all fuel market conditions, and most importantly, create greater revenue for their business.
by John Keller | Dec 5, 2012 | Fuel Price Management, Industry News
In their Annual Energy Outlook 2013 Reference case released today, the US Energy Information Administration predicted the demand for motor fuels will continue to decline next year and beyond through 2040. In other words, the size of the fuel volume pie is going to continue to shrink, impacting all those in the fuel price management industry for the foreseeable future.
The US EIA cites as a root cause the new vehicle fuel economy requirement that increases vehicle efficiency from 32.6 miles per gallon in 2011 to 47.3 miles per gallon in 2025. The US EIA projects this vehicle efficiency requirement will reduce gasoline use in 2025 by .5 million bpd compared to 2012.
The report also projects that diesel fuel consumption will be somewhat offset by the use of liquid natural gas in heavy-duty vehicles.
From a fuel price management perspective, this highlights the ongoing competitive nature of the retail fuels business as c-stores and grocery chains continue to fight for an ever shrinking total fuels volume market. Only those companies with the most efficient fuel pricing software will be successful in such a highly competitive environment.
by John Keller | Oct 8, 2012 | Fuel Price Management, Industry News
In their third quarter 2012 investor news letter, hedge fund manager Third Point, LLC urged Murphy Oil to spin off their retail fuel business. In the letter, Third Point says spinning off the retail fuel business would result in a share price increase of about 60%.
In the letter, Third Point used Alimentation Couche-Tard, Casey’s General Stores, and Susser Holdings as a reference to suggest the Murphy 1100 store retail fuel business would be worth $2.3 billion to $2.8 billion if it were a standalone public company.
This makes for an interesting comparison to the recent Valero announcement of a pending course of action for their retail fuel business, including a possible spin off. Valero has a 1027 store network comparable in size to Murphy. Reuters and others have estimated the value of a Valero spin off to be $3.5 billion. There have been some reports that Valero is looking to sell their retail units, but Valero sees < ahref="https://www.priceadvantage.com/blog/2012/10/01/297-fuel-price-management-blog-valero-sees-advantages-to-spinning-off-their-retail-fuel-division-" target="_blank">advantages to a spin off vs. a sale.
The Third Point letter may be found here.
