by John Keller | Jul 18, 2014 | Fuel Price Management, Fuel Price Optimization, Fuel Pricing Strategy, Retail Fuel Margins
The OPIS report today revealed that retail fuel margins have risen for the third straight week. This week the average retail fuel margin is up $0.048 per gallon, reaching $0.276 per gallon, the highest retail fuel margin of the year, and the highest since September of last year.
The year to date average now stands at $0.171 per gallon, the highest since February 7. The six week average stands at $0.202, the highest of the year, and the highest since November 22 of last year.
So far this quarter is shaping up to have the highest average retail margin of any quarter this year. Currently the average retail fuel margin for the quarter is 0.252, a full $0.06 per gallon higher than the quarterly average at this point last year.
The equivalent day last year the average retail fuel margin was only $0.100 per gallon which means we’re currently $0.176 per gallon above last year right now.
Certainly these margins can’t last forever. But the savvy fuel analyst will make the most of these times when volumes are solid in the summer, and margins are higher than ever.
by John Keller | Jul 11, 2014 | Fuel Price Management, Fuel Price Optimization, Fuel Pricing Technology, Industry News
Here’s something many people may not know: fuel efficiency improves during the summer months. NACS provides an excellent explanation here, with four key reasons displayed below:
A number of factors, all weather related, can increase fuel efficiency by as much as 10% during the summer months, regardless of the type of fuel purchased:
- Engines are more efficient: In the colder months, it can take longer to start a car and multiple cranks of the engine waste fuel. In addition, many drivers give their cars a chance warm up, whether to defrost windows or heat the interior. This idling detracts from fuel efficiency. But even without this idling, car engines are less efficient when cold. It may take a while for a cold engine to achieve peak efficiency and on extremely cold days it may never achieve peak efficiency. Overall, engines perform much better when outside temperatures are 90 degrees, not 20 degrees.
- Ice and snow detract from mileage: Ice and snow can hurt mileage, whether on the roads or on a vehicle. Cars are likely to spin their wheels under icy conditions, reducing mileage. Also, drivers tend to travel at less fuel-efficient speeds under poor road conditions brought on by extreme winter weather. In addition, any snow or ice on a vehicle adds weight and makes the vehicle less aerodynamic — as does any weather-related grime on the vehicle. One more thing: Hot air is less dense than cold air. All things being equal, a vehicle is more aerodynamic travelling through hot air.
- Better tire pressure: Tires lose air pressure in colder temperatures. If a tire’s air pressure isn’t adjusted in the colder months, it will be flatter and increase resistance and friction, leading to reduced fuel efficiency. The opposite occurs in the warmer months, and fuel efficiency can increase.
- Lubricants perform better: A car’s oil is more viscous (thinner) when it is warm and engines perform more efficiently when oil is thinner. The same holds true for all other lubricants. In addition, people take better care of their vehicles when it is warmer outside. They are more likely to change the oil and conduct other routine maintenance that can improve fuel efficiency.
by John Keller | Jun 13, 2014 | Fuel Price Optimization, Fuel Software, Industry News, Retail Fuel Margins
Today’s OPIS report reveals that the average US retail fuel margin increased for the second consecutive week, this time rising $0.025 per gallon to an average of $0.196 per gallon. That raised the year to date retail fuel margin average to $0.164 and the Q2 average to $0.171 per gallon.
For the seventh consecutive week, the six week average increased, this time up $0.007 to hit $0.197 per gallon.
Last year at this time, the average retail fuel margin across the US was $0.152 per gallon. That means after being below last year for two weeks, this year’s average retail fuel margin is back above last year, a position we’ve held this year four times over the past six weeks.
Last year at this time, the average retail fuel margin had three consecutive weeks of increases, capping at a whopping $0.302 per gallon reported on July 5. With the political unrest in Iraq having an impact on the Brent Crude and WTI levels, where they are now trading at the highest levels of the year, it may prove difficult to reach the margin heights we attained last year.
by John Keller | May 29, 2014 | Fuel Price Optimization, Fuel Pricing Strategy, PriceAdvantage
Traffic patterns are typical most of the time. We build stores, sell stores and tear down/rebuild stores based on these typical traffic patterns. Traffic is important to us as we price fuel because we can take advantage of changes in traffic flows.
Seeing traffic changes is where we find extra pennies and gallons. Integrating Google Maps with our pricing process gives us the ability to have local eyes on traffic patterns caused by things like concerts, ball games, and road construction.
Take for example a scenario where a large employer on the Southeast side of town closes down. If you don’t live in the area, it may take six months before you learn that you are losing fuel volume to the one station across the street due to the traffic pattern changes. Because the local guy has known that the rush hour is no longer when the volumes are, he has moved up his price during the week still getting business from the locals without much of a volume hit given the reduced overall volume market size. Then he makes the most of the weekend traffic by pulling tourist traffic off the highway with a low price and a billboard sign.
With PriceAdvantage, we can be 600 miles away from a station and feel like a local by leveraging the traffic view. With Web traffic information at our fingertips we can see what’s happening right now, and immediately make pricing adjustments to leverage the patterns we see. In this way we can adjust pricing strategies for the short term, or make immediate pricing exceptions to strategies we have in place, and then execute those optimized prices to the street in time to take fullest advantage of what’s going on in the market right then and there.
by John Keller | May 13, 2014 | Customer News, Fuel Price Optimization, Fuel Pricing Strategy, Fuel Software
PriceAdvantage customer CST Brands reported their earnings for their first quarter today. Here are the fuel highlights.
- Retail fuel margins before credit card fees were $0.139 per gallon, up from $0.116 per gallon for the same period in 2013. According to the weekly OPIS reports, average retail fuel margins across the US were down $0.001 per gallon compared to last year. That means CST Brands was able to beat the national average this year and gain margins. This is the goal of CST Brands according to previous financial reports, as CST Brands has shifted their fuel pricing strategy to focus on gaining retail fuel margins. CST Brands was once again successful in achieving that margin goal.
- Retail fuel volumes per site per day were 4,797 gallons compared to 5,048 gallons last year. That equates to a 4.97% decrease in gallons year over year.
Is this strategy shift to a margin emphasis working for CST Brands, given the loss of volumes? Let’s do the math. Suppose Q1 of 2014 had the same number of gallons sold in the US as Q1 of 2013. That’s a bold assumption, given that fuel volumes have been on a continual decrease for many years now, but for argument’s sake let’s use that assumption. Multiply the 2013 results of 5,048 gallons by $0.116 per gallon, and you get $585 in daily margin. Multiply the 2014 results of 4,797 gallons by $$0.139 per gallon, and you get $666 in daily margin. That’s an improvement in daily margin of $81. Multiply that by 90 days in the quarter by 1038 stores and you get an improvement of $7.57 million.
Clearly the fuel pricing strategy at CST Brands is working.
CST Brands, when they were under the Valero umbrella, worked closely with the PriceAdvantage team to develop a rich set of analysis views and reports so they could optimize their entire fuels business. Since rolling out PriceAdvantage across all their stores in 2012, CST Brands now reaps the benefit of this rich information in PriceAdvantage by implementing a winning fuel pricing strategy as proven by these quarterly results.
by John Keller | Apr 4, 2014 | Fuel Price Management Solutions, Fuel Price Optimization, Fuel Software, Industry News, PriceAdvantage
On page 90 of the March issue of Convenience Store News magazine, there is some interesting survey insight regarding c-store retail fuels sales, comparing 2013 to 2012:
- 40.9% of c-stores surveyed said gas price volatility caused a decrease in store traffic.
- 38.6 % said gas price volatility caused a decrease in profitability.
- 27.3% said gas price volatility caused a decrease in sales.
- 13.6% said gas price volatility caused improved margins.
- 17.3% said they had increased gallons sold per transaction.
- 32.7% said they had decreased gallons sold per transaction.
- 50% said they had the same gallons sold per transaction.
What are we to make of this? Savvy c-store chains are able to manage what they measure, and develop effective fuel pricing strategies that fit into the overall profitability of each store. That means optimizing store traffic, acknowledging cases when sales and gallons sold per transaction may be lower, but managing every penny to optimize profits, both at the forecourt and in the store.
PriceAdvantage in conjunction with PDI allows you to directly see the correlation between fuels sales and other transactions of any kind. We call this the Volume Correlation report, unveiled at NACS and released in PriceAdvantage version 2013.3. Using PDI information, you can quickly see the correlation between fuel promotions and in-store sales, number of transactions, and average transaction size by product category, overlayed on top of volumes sold and price per gallon.
How do c-stores survive in today’s volatile fuels market? The old adage “You can’t manage what you can’t measure” holds true. With PriceAdvantage c-stores manage what they measure.
