by John Keller | Sep 15, 2014 | Fuel Price Management, Fuel Pricing Strategy, Fuel Software, PriceAdvantage, Retail Fuel Margins
Brian Milne, Energy Editor for Schneider Electric, contributed another excellent update on Convenience Store Decisions today.
From a fuel price management perspective, the key takeaways are as follows:
- Brent crude oil dropped into the mid $90s bbl, below $100 bbl for the first time in over a year.
- West Texas Intermediate traded at $90.43, the lowest since May 2013.
- Retail fuel prices are likely to drop as much as $0.25 or more over the next 6-8 weeks.
We know that with the summer travelling season behind us, the annual seasonal trend should show us lower volumes from here through the end of the year. If Mr. Milne’s prediction holds true, and retail fuel margins increase as retail fuel prices drop, we’re heading into a season of strong retail fuel margins through Q4. In 2013, retail fuel margins hovered in the $0.188 to $0.191 range throughout the fourth quarter, and we didn’t see such margin increases. Hopefully 2014 will prove to be more profitable.
by John Keller | Aug 30, 2014 | Customer News, Fuel Price Management, Fuel Pricing Strategy, Industry News, PriceAdvantage
The Syracuse Post-Standard newspaper interviewed Kim Bowers, the CEO of CST Brands, which recently acquired the chain of Nice N Easy stores in New York. The full interview can be found here.
Ms. Bowers’ daughter attends Hamilton College and frequented the local Nice N Easy store. Her daughter would often email photos of the store to her mom and tell her how much she liked it.
Ms. Bowers’ said CST Brands was attracted to the change because Nice N Easy had such great community involvement, and outstanding customer support. She said Nice N Easy customers should expect no changes, other than some more product offerings from the CST Brands private label brand “Fresh Choices”. The CEO said that at CST Brands it’s common for the customer to come inside the store because of the relationship they have with the people inside the store.
From a fuel price management perspective, this customer service focus and attention to the community plays into strategies that may not need to provide the lowest fuel prices in town. Customers are willing to by fuel at stores they like – just like the old saying goes “People do business with people who they like to do business with.”
by John Keller | Jul 29, 2014 | Fuel Price Management, Fuel Price Optimization, Fuel Pricing Strategy, Fuel Software, Industry News
For a while now we’ve been tracking the growth of the Diesel fuel market from the fuel demand perspective and the number of Diesel vehicles on the road.
CSP.net published an excellent article here discussing the opportunity for fuel retailers to take advantage of the growing Diesel market. While the current market share of Diesel vehicles is only about 1% of the U.S. vehicle market, or 3% when expanded to include vans and light-duty trucks, the Diesel Technology Forum reports the number of diesel registrations has increased 30% since 2010.
A big reason for this is that auto manufacturers are turning to Diesel to help them hit their CAFE target of 36.5 mpg for cars in 2016. Diesel provides roughly 30% better fuel mileage than gasoline, and it has a far superior infrastructure and consumer familiarity than electric or hydrogen vehicles.
From the fuel manager perspective, this makes for a compelling case to consider adding Diesel to the product portfolio in markets where it has the best growth opportunity. In areas where the competition isn’t yet carrying Diesel, providing Diesel as a portfolio differentiator may be one way to help bring up overall fuel margins. Have your field managers keep an eye on the vehicle demographics in their regions, both on the road and in the dealerships, to see if Diesel models are becoming more popular. Test the most promising markets and then strike in those areas where the iron is hot. You may find that your fuel volumes are shifting from gasoline to Diesel, with a net result of increased fuel volumes, and fuel margins, overall.
by John Keller | Jul 25, 2014 | Fuel Price Management, Fuel Pricing Strategy, Industry News, Retail Fuel Margins
The report from OPIS today shows that with the $0.016 increase in the average retail fuel margin this week, the retail fuel margin level now stands at $0.292 per gallon, the highest in over 12 months. The last time we saw retail fuel margins above $0.290 was July 5, 2013 when the average retail fuel margin hit $0.302 per gallon, the highest margin of 2013.
This week marks the fourth consecutive margin increase, totaling an increase of $0.135 per gallon since June 27. We’re seeing a slow but steady rise in the year to date average, with the current year to date retail fuel margin being $0.175 per gallon. The average for this quarter is $0.248 and the six week average is $0.218 per gallon.
Last year at this time, we were at $0.176 per gallon. That means we’ve now seen retail fuel margins above last year for three weeks in a row. Interestingly, this time last year the average retail fuel margin up to that point was $0.177 per gallon, so we’re tracking nearly identically on an annual basis.
by John Keller | Jul 23, 2014 | Customer News, Fuel Price Management, Fuel Pricing Strategy, Fuel Pricing Technology, Fuel Software, Industry News, Retail Fuel Margins
According to an online article on the Barron’s site today, “CST Brands, one of the largest (c-store) operators, could ring up impressive gains for investors….Damian Witkowski, an analyst at Gabelli & Co., puts the private market value of the shares at $48. That’s nearly 50% higher than Tuesday’s close of $32.94. While that valuation gap might not close right away, in the next year the stock could jump 20% as earnings improve.”
Why is this analyst so bullish on CST Brands? Because of how well CST is managing the balance between fuel margins and volumes. “Since its spinoff from Valero ( VLO ) in May 2013, CST has been boosting fuel margins and opening new larger format stores under its Corner Store moniker…CST has been seeing success from its strategy. As an independent retailer of fuel, CST has been able to focus on improving fuel margins, rather than selling more fuel, as it had when it was part of Valero. In the March quarter, margins jumped 19% to 10 cents per gallon, from the same period a year ago.”
To what can we attribute this fuel price management success? PriceAdvantage, which CST Brands began implementing in July 2012, finishing the rollout by the end of that year. In the latest earnings report, retail fuel margins before credit card fees were$0.139 per gallon, up from $0.116 per gallon for the same period in 2013. Though volumes were down year over year, something easily attributed to the overall decline of fuel volumes in the industry, I wrote a blog article about the success CST Brands is seeing as they manage the balance between fuel margins and volumes.
The fuel team at CST Brands is a great partner of Skyline Products, both on the PriceAdvantage side and the Electronic Price Sign side. The CST Brands fuel team has worked closely with the PriceAdvantage team to help us develop the best-in-industry volume, margin, commodity, and competitor analysis interfaces. The benefit to the rest of the industry is that these interfaces are provided as part of the standard set of analysis views available with PriceAdvantage. These views are not custom one-offs that cause problems with future software upgrades – they are standard out-of-the-box features that pose no grief with upgrades.
We’re proud to work so closely with CST Brands, and look forward to including their ongoing wisdom and insight in future versions of the PriceAdvantage software.
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.
