by John Keller | Feb 12, 2015 | Fuel Price Management, Fuel Pricing Strategy, Industry News
According to the Wall Street Journal today, the US Energy Information Administration announced Wednesday that US crude stockpiles are at another record high. Oil companies are cutting back on their drilling investments and drilling activity has slowed, but the effects are not likely to be felt until the second half of this year, so say many experts.
The total quantity of oil in storage by companies such as refiners and traders is at the highest level in roughly 80 years. The US EIA stated in their weekly report that US oil production rose again to 49,000 barrels a day to 9.2 million barrels per day in the latest week, the highest level in reports dating back to 1983.
Oil prices dropped below $50 again to $48.84 per gallon on NYMEX. Gasoline futures fell by .91% while Diesel futures fell by 1%.
What does this mean from a fuel price management perspective? This is the season when refineries shut down plants for maintenance in anticipation of the higher demand months of summer. Usually that means refinery supplies lower and wholesale prices rise. Perhaps this year the inventory surplus will keep that wholesale increase at lower levels than years past, and lower oil prices will help suppress fuel price increases.
by John Keller | Feb 2, 2015 | Fuel Price Management, Fuel Pricing Software, Fuel Pricing Strategy, Industry News, Retail Fuel Margins
Brian Milne, the Energy Editor at Schneider Electric presented some interesting statistics today, via Convenience Store Decisions. Here are the highlights:
- Wholesale spot market is up
- US Crude production growth is predicted to continue
- The traditional trend of the spring season is set to reverse the current 17 week string of declines in US retail gasoline prices
- Futures contracts are at a two year high pointing to expected gasoline price increases
- Amount of gasoline supplied to the primary market is higher than last year and five years ago (consumer demand is up)
- The highest two weekly averages of the year for gasoline supplied to the primary market were the last two weeks of the year
- Oil prices continue to drop on NYMEX
The seasonal trend of every spring time involves the transition from winter blends to summer blends, scheduled refinery shutdown due to scheduled maintenance, and anticipated increased volume usage as the weather improves and consumers drive more.
What does this mean from a fuel price management perspective?
We should see the increase in wholesale prices that we always see this time of year, even if oil prices continue to decline. That means strong retail fuel margins will be hard to come by. As NACS reported in their consumer survey today, consumers are willing to drive five miles out of their way to save five cents per gallon, and 65% of those surveyed said they had taken advantage of a discount such as a loyalty program.
We should also see a prolonged increase in retail fuel volumes as consumers are willing to drive more at current prices.
by John Keller | Jan 9, 2015 | Fuel Price Management, Fuel Price Optimization, Fuel Pricing Strategy, Fuel Software, Retail Fuel Margins
The OPIS report today revealed the average retail fuels margin across the US was $0.288 per gallon, down $0.047 from last week.
That is the third consecutive weekly decline, but the US retail average is still nearly double the margin of the equivalent week last year when the retail fuels margin was $0.146 per gallon. The six week average remains at a robust $0.326 per gallon. This is the fifth consecutive week when the six week average increased.
Last year at this time the retail fuel margin average bumped along the bottom until breaking above $0.20 per gallon the first week of March.
Perhaps the continued margin average decrease over the past three weeks is an indication that fuel marketers are now vying for volume and willing to sacrifice some of their margins. Only fuel pricing software like PriceAdvantage can allow the savvy fuel analyst to play the volume / margin game and make the most profit during these turbulent times.
by John Keller | Jan 7, 2015 | Fuel Price Management, Fuel Pricing Strategy, Industry News, Retail Fuel Margins
Today the Wall Street Journal reported that US Inventory data predicts gas prices will continue to fall. The article refers to a report that oil and fuel supplies have risen to a record high, pushing gasoline futures to a near six year low.
US stockpiles of crude oil and refined fuels are at the highest level ever, dating back to 1990. In addition, US consumption of petroleum fell slightly. “Gasoline inventories rose by 8.1 million to 237.2 million barrels, the highest level since February 2011, according to the EIA. Analysts expected an increase of 3.2 million barrels.” Nicole Friedman wrote.
Both gasoline and diesel futures are now at the lowest levels since 2009. From a fuel price management perspective, declining retail prices will mean decreased revenue, but if history repeats, increased fuels margins. However, during this season when retail fuel volumes are lowest, we will see retail fuel marketers sacrifice margin to gain volume where they can.
by John Keller | Dec 29, 2014 | Fuel Price Management, Fuel Pricing Strategy, Industry News, Retail Fuel Margins
The OPIS report showed for the week ending December 26 retail fuel margins across the US averaged at the highest levels of the year. The US average this week was $0.376, down only $0.005 per gallon from the previous week.
The year to date retail fuel margin average stands at $0.218, while the Q4 average is $0.303 and the six week average is $0.310.
The average margin at this point is a whopping $0.236 above the equivalent week last year. We’re finishing up 2014 with an overall retail fuel margin of the year that is $0.028 per gallon higher than the overall retail fuel margin of 2013.
From a financial earnings standpoint, the fourth quarter this year finished $0.103 above Q4 of 2013. Couple those improved margins with the increased fuels demand reported lately, and we can expect to see strong quarterly results by publicly traded fuel marketers in the coming months.
by John Keller | Dec 18, 2014 | Fuel Price Management Solutions, Fuel Pricing Strategy, Industry News
At the close of the NYMEX today, Oil traded at $54.70 bbl, down $1.77 from yesterday. Gas prices continue to plummet across the US, and experts predict that gas prices are not yet at their lowest.
That’s a pretty safe prediction, given that it takes time for decreased NYMEX oil prices to make their way through refining, to wholesale, to the retail channel. And since a $5 drop in crude can equate to a $0.12 drop in gas prices, it’s not unreasonable to expect retail fuel prices to drop that much in the coming days. Many fuel retailers are experiencing a time when their replacement margins are routinely below their actual margins, since the cost of buying a new load today is less than what they paid yesterday (or last week, depending on how quickly they turn over the inventory in their tanks).
What does this mean from a fuel price management perspective? First, it means we can expect to see increased retail fuel margins to finish off the year. That should make Q4 of this year one of the strongest in recent history.
Second, it’s important to consider that the retail fuel pricing game is not as simple as the basic price elasticity principles you learned in Microeconomics 101. Consumer psychology is always at play. As a wise fuel manager once taught me, sometimes lower gas prices lead to the customer reaction of waiting to see if the prices drop even further. And now that the US culture has started to get used to falling gas prices, just because you drop retail fuel prices at your locations doesn’t mean you’ll automatically see an uptick in fuel volumes.
The retail fuel pricing business requires no less finesse in these times than in times of low fuel margins. Fuel pricing software like PriceAdvantage continues to be critical for analyzing your business so you can always have the right price at every store all the time.
