by John Keller | Apr 27, 2010 | Fuel Price Optimization, Retail Fuel Margins
As reported in CSP News, the latest Lundberg survey of 5000 US gas stations determined that over the past two weeks, the average price of fuel decreased $.42 per gallon. With the price of crude oil increasing $.20 per barrel over that same time period, retail fuel margins shrank by 2.16 cents per gallon.
So far this year, the combined retail fuel margin of all three grades of gasoline stands at 11.51 cents per gallon, just one tenth of one cent below the margins of 2009.
Such razor thin retail fuel margins continue to reinforce the urgency to manage fuel prices, volumes, and margins with a robust Fuel Pricing Software system. These systems provide the strategic capabilities and speed to the street beyond those provided by simple homegrown Excel systems.
by John Keller | Apr 15, 2010 | Fuel Price Optimization, Industry News, Retail Fuel Margins
In a statement that sets consumer expectations for fuel to top out at $3/gallon this year, the Troy Messenger reported today that an expert with AAA doesn’t expect fuel prices to go much above $3/gallon if even that.
“This is just the time of year where we see prices increase because our demand naturally increases,” said Clay Ingram, public relations and marketing manager for Alabama AAA.
Ingram said the trend occurs every year around spring after drivers have recovered financially from the holidays and have begun to get out and enjoy the weather. “It’s not unexpected by any means,” he said.
Ingram said economic factors may be currently influencing fuel prices, as well. “There seems to be a little optimism on the Wall Street side of things that the economy might be turning around,” he said. That confidence drives up the price of commodities as investors rush to buy crude oil.
Still, Ingram said that at $83 per barrel, the price of oil is where it should be, and while demand is rising as expected, it is still relatively low. “Our demand right now comparatively, is really mild,” he said. For that reason, Ingram explained consumers shouldn’t worry about any dramatic increases in fuel prices like what was seen two years ago.
“That will be why we won’t see our fuel prices go up a dollar per gallon in a month,” he said. “I don’t think we’ll see anything that extreme this year.”
Ingram said that high inventories and favorable refining capacities are also factors that will likely prevent sudden fuel price increases since they would allow for the accommodation of a sudden spike in demand.
In fact, Ingram said fuel prices could be near a high-mark for the year. “I’m not even sure we’ll go over $3 a gallon this year. If we do, it won’t be by much,” he said.
by John Keller | Apr 14, 2010 | Fuel Price Management, Fuel Price Optimization, Fuel Pricing Software, Fuel Pricing Technology, Industry News, PriceAdvantage, Retail Fuel Margins
Skyline Products announced today that they have launched a new separate division to focus solely on their patent-pending PriceAdvantage™ software that is literally changing the way the convenience store industry manages fuel pricing.
The industry has taken notice. “Customers like Sheetz, Royal Farms, Fikes Wholesale, Spinx and others are faster, more efficient, fully automated way to run their fuel business,” says Aaron McHugh, who is leading the charge for the new PriceAdvantage software division.
Sheetz saw $141,000 cost savings, Fikes Wholesale, Spinx and Rutter’s are now controlling price changes from headquarters to their pumps, POS and electronic signs. “With the tactical elements fully automated, our customers can better focus on their strategy,” says McHugh. The return on investment for PriceAdvantage is often less than 12 months making this one of the most effective and efficient tools in the industry.
Seven years ago, this long-time hardware and software company saw an opportunity to dramatically increase their customers’ fuel profits by providing fuel managers with critical competitive information, making it simple and quick to implement price changes. PriceAdvantage puts the optimal price at the fuel manager’s fingertips and allows them to command every price change from headquarters. This maximizes fuel profitability by guaranteeing that the right price is the price is posted.
Greg Stadjuhar, Skyline Vice President of Sales says, “With our long time involvement in the petroleum industry, we recognized an opportunity to leverage the ingenuity and success we’d experienced with command and control software in the transportation industry for the last twenty years. It became clear very quickly that we had the right formula. Almost immediately, PriceAdvantage became a tremendous success for Skyline and our customers.”
Skyline has been so successful with PriceAdvantage they are launching a new division dedicated solely to its continued development and success. “The market has been in need of this for a while. If we can put a man on the moon, why do fuel price managers still have to manually hunt down competitive and market data, and call every store for a price change?” says McHugh. “We’ve solved that problem, and we are the only company doing it. The time is right, the market is ready, and we are delivering.”
Underscoring their commitment, they have hired software industry veterans to help implement a strong infrastructure and accelerate their success. Joining McHugh’s team are John Keller and Quentin Goin, each bringing more than 13 years of business-to-business software industry experience.
Sr. Product Manager, John Keller, says, “This is an exciting and compelling opportunity for me. I thrive on taking customer and market input, and helping create a solution that they don’t know how they ever lived without. Skyline’s PriceAdvantage software began something that will allow us to literally revolutionize the way fuel prices are managed. This is only the beginning of an industry-wide shift and we are on the forefront making it happen.”
A perfect compliment to Keller’s skills, Quentin Goin, Sales and Implementation Engineer, works side-by-side with customers and implements a configured PriceAdvantage solution to match their needs. Passionate about his work, an animated Goin says, “I have been helping customers solve problems with technology since 1997, and I have never seen such a rapid and considerable return on investment as Skyline customers get with PriceAdvantage.”
Says McHugh, “Skyline’s innovation and commitment to solving these problems is driving expansion and growth even in a tough economy. The contribution of these two accomplished software industry experts has already increased the speed at which we are delivering high quality solutions to our customers.”
by John Keller | Apr 14, 2010 | Fuel Price Optimization, Fuel Pricing Software, PriceAdvantage, Retail Fuel Margins
John Keller, Sr. Product Manager and R&D Manager of the PriceAdvantage fuel pricing software division of Skyline Products will be a member of the PCATS panel at the upcoming NACStech tradeshow May 5-7, 2010 in New Orleans.
The panel of 5 will discuss the topic relevant to convenience stores “Why Doesn’t This Stuff Work Together? Device Integration Work Being Conducted By PCATS”. The moderator will be Scott Wood, PCATS Director, Standards Development & Maintenance. It should be a lively discussion.
by John Keller | Mar 15, 2010 | Fuel Price Management, Fuel Price Optimization, Retail Fuel Margins
Every year around this season we see c-store fuel prices begin a gradual increase from spring to summer. This Forbes article explains the primary reason behind this fuel pricing strategy as being related to EPA federal regulations around emissions. Summer fuel must meet regulatory requirements imposed on refiners: summer blends of fuel must not turn to vapor in summer temperatures, otherwise the vapor contributes to air pollution. This summer blend costs more to produce, and consequently pushes up the price of fuel at the pump.
This is a positive article from the perspective of the Fuel Manager because it clearly explains to the layman that these annual price increases are not caused by c-stores trying to up their profits. It’s a rational explanation that anyone can understand.
You may find the entire article here.
by John Keller | Mar 9, 2010 | Fuel Price Management, Fuel Price Management Solutions, Fuel Price Optimization, Fuel Pricing Strategy, Fuel Pricing Technology, Retail Fuel Margins
There’s a great article explaining fuel pricing strategies to consumers on the website ENCToday.com. It’s common for consumers to have misconceptions about how their gas prices are set. Sometimes these misconceptions can include cartel-like price fixing arrangements between c-stores in a particular market. This article goes miles to debunk these misconceptions and accurately explains the truth about how fuel managers actually set their c-store fuel prices.
This article lists these factors as being included in fuel pricing strategies:
- Total customer experience including cleanliness of the c-store building
- Competition down the street
- Maximizing volume
- Traffic flow and the convenience of pulling into a particular c-store
- Locking in lower fuel prices in the futures market
- Demographics of a location and the price elasticity in that neighborhood
- Selling fuel at a lower price and enticing customers to come into the c-store to buy a higher margin snack
- Corporate retail fuel margin targets
Fuel price management solutions such as PriceAdvantage from Skyline Products allows the Fuel Manager to carefully watch each market, effectively monitor fuel pricing trends at each c-store, and set street prices at each store location. Fuel Managers can accelerate their speed to the street by pushing prices to the sign, POS and pump. In some markets, that can even mean pushing new prices several times a day.
The article is copied and pasted below.
Competition among factors driving gas prices
It was no coincidence that Dennis Seeney pulled off Interstate 85/40 Friday afternoon to fill up at the Sheetz gasoline station.
“I live in Asheville, but I travel the state so I know where the cheapest prices are,” Seeney said while filling his gasoline tank.
Seeney paid $2.599 for a gallon of unleaded fuel, as did motorists buying gasoline at a number of other stores at that exit and others nearby. A couple of stations at the exit sold gas for a penny cheaper, while another’s advertised price was 10-cents-a-gallon more expensive.
The interchange’s prices were less expensive than the average North Carolina price of $2.67 per gallon and the average national price of nearly $2.70 per gallon, according to the GasBuddy.com Web site.
Greg Parsons also filled up at the station. Again, it was not by accident. He and his family travel between his Windsor, Va., home and another home in Morganton about every six weeks. But it wasn’t cheap gasoline that drew the family to stop at the station.
“It’s a clean building,” Parsons said. “We always stop at this station. It’s actually programmed into my GPS.”
The difference in prices along that stretch of the interstate highway near Haw River and Mebane are part of a complex system of determining prices.
“Some of it is competition,” said Tom Crosby, vice president of AAA Carolinas. “If one station down the street has it at $2.60, I might want to do it at $2.55 to generate more volume.”
Some has to do with neighborhoods and the amount of traffic going by, Crosby said, noting that often prices are higher off of an interstate highway.
“They can’t shop for the price of gas, so they’re going to pull off whenever they need it,” Crosby said. Michael Walden, an economics professor at N.C. State University, said that supply and demand factors also account for geographic differences in gasoline prices. “Everything in economics comes down to supply and demand,” Walden said.
On the supply side, suppliers could have faced different prices, he said. “If the supplier had, for example, locked in a lower price in the futures market and prices indeed went up, he could pass those lower prices on to his distributors,” Walden said.
But price differences from station to station are more likely a result of demand-side variables, he said. Factors pushing prices up could include stations that are in high-income areas where people are not as sensitive to changes in price, stations located on lots where motorists can get in and out more easily or stations connected to a convenience store, where motorists may want to make other purchases after filling up.
“All those can be reasons for geographical differences in price,” Walden said.
A number of other factors could figure into the price at the pump. A store owner could just break even on gasoline, hoping that a number of motorists would come inside and purchase a snack, Crosby said.
Another store owner might keep prices a nickel or so higher than nearby stations as long as sales remain constant, Crosby said. “If I’m not losing any sales, there’s absolutely zero incentive to drop it,” he said.
Stations owned by the oil companies generally have prices a little higher than stations that buy their gas on the spot market, Crosby said.
“They buy it at a lesser price,” Crosby said of the stations buying gasoline on the spot market. “But you can’t always count on getting it,” he said, referring to times in the past when various conditions produced shortages of gasoline.
Then there is the delivery cost factor. A station closer to the gasoline terminal would have a lower delivery cost than one further away, Crosby said.
A number of other factors go into making up the price of a gallon of gasoline, including the price of crude oil, refining expenses and federal and state taxes.
Crosby noted that gasoline stations are constantly monitoring other stations’ changing prices. “You don’t want to be five or 10 cents out of line with the one that is caddy-cornered across the street from you,” Crosby said.
