by John Keller | Jul 8, 2014 | Fuel Price Management Solutions, Fuel Pricing Strategy, Industry News, Retail Fuel Margins
It has been a tough first half of the year as far as retail fuel margins go. According to the weekly OPIS margin reports, the year to date average currently stands at $0.165 per gallon compared to $0.180 this time last year. Alimentation Couche-Tard, whose outlets include Mac’s and Circle K, just reported in their financial earnings their gross fuel margin in the United States fell more than 23% this quarter to $0.1485 per gallon from $0.193 per gallon same quarter last year. While same-store fuel volumes increased 2.8% at Couche-Tard, that wasn’t enough to prevent the company from missing analysts’ expectations.
But according to Brian Milne of Schneider Electric, now that ISIS (the extremist militants, not the mobile wallet company) has been contained in Iraq, and Libya is expected to increase their output from roughly 200,000 bpd to 500,000 bpd in the near term, supply disruptions are perceived as being much less likely. That explains why global oil prices are down from early June and should continue on that trend. The Brent crude contract is already down $5 bbl from its June high.
That means now is the opportunity to gain margins the fuel retailing industry lost while the cost of oil was climbing. Keep careful watch on the competition, but don’t be too quick to drop your retail fuel prices – use retail fuel pricing software like PriceAdvantage to protect your margins.
by John Keller | Jul 4, 2014 | Fuel Price Management, Fuel Pricing Strategy, Industry News, Retail Fuel Margins
The OPIS report today revealed a restoration of retail fuel margins back to levels last seen June 13. The average retail fuel margin rose $0.038 per gallon this week to $0.195 per gallon. That’s still a far cry from this same time last year where the average retail fuel margin was over ten cents higher at $0.302 per gallon.
The year to date and last six week retail fuel margin averages were both up $0.001 per gallon, at $0.165 and $0.174 per gallon respectively.
This week last year the retail fuel margin average took a $0.13 nose dive to $0.171 per gallon. If we can hold our retail fuel margin average steady this week, we’ll be back over the number last year, which would be the first time since June 13.
by John Keller | Jul 3, 2014 | Fuel Price Management, Fuel Pricing Strategy, Industry News
It seems that everywhere we turn heading into this July 4th weekend we see news stories about the high price of gas. In the Wall Street Journal today the top story in the third section is “Pump Prices Wallop Wallets: Fuel Cost Hits a Holiday High Unseen in Years; ‘It Eats Away at Your Lifestyle”.
Whew – how’s that for an attention grabbing headline!
The article goes on to say that gas prices this holiday season are the highest since the record highs of 2008. The US national average is $3.67 which is $0.20 higher than this same time last year. The average gas price this year is the second highest of the past ten years.
The article attributes the blame to oil investors and traders who are worried that the unrest in Iraq will cause a prolonged increase in the barrel of crude. Iraq was the sixth-largest oil exporter to the US this past April.
Michael Green, a spokesman for AAA, cautioned that drivers may cut back on shopping, dining or going out because the higher gas prices affects their budget. The article emphasizes the point that because of the increased domestic oil production in the past years, the US has near record oil inventories, and so we are not on the same level of dependence as we were in 2008 when oil prices hit $150 a barrel. That means we are buffered from a repeat of 2008 when gas prices hit $5 a gallon in some parts of the country.
The AAA also says the number of Americans expected to drive 50 miles or more during this holiday weekend is 34.8 million people, the highest in seven years.
Another interesting statistic quoted in the article: gas prices dropped an average of $0.21 in June over the past three years, but gas prices rose this year.
What can we take away from all this from a fuel price management perspective?
1. Drivers are expecting to see higher prices at the pump, so they won’t be experiencing sticker shock as they travel this weekend.
2. The US economy continues to improve, and consequently we’ll see more miles traveled this weekend, and more demand than last year’s holiday weekend. That means more volume available to capture overall. Combine the increase in volume with the higher gas prices, and we can expect to see higher fuel revenues this year than last.
3. We know that retail fuel margins suffer during times of retail fuel price increases, and that is proving to be true once again as we compare OPIS reported margins this year to last year. We’ll likely see margins in the range of $0.17 per gallon lower this holiday weekend than last year.
4. The more volatile the rack price, the more at risk you are of losing pennies on every gallon. And with higher gallons available in the market this year, those opportunity losses are amplified.
Only with the rich analysis and rapid speed to the street of fuel price strategies provided by PriceAdvantage can you make the most of the market this holiday weekend, and the entire summer season.
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 16, 2014 | Fuel Pricing Strategy, Fuel Software, Industry News, Retail Fuel Margins
The OPIS report today showed the average retail fuel margin across the US improved for the fourth straight week, rising $0.037 per gallon to $0.248 per gallon.
The year to date average broke $0.16 per gallon for the first time since March 7, rising $0.005 to reach $0.161 per gallon. The quarter to date average broke $0.16 per gallon for the first time this quarter, hitting $0.166 per gallon. The six week average now sits at $0.168 per gallon, the highest level since February 21 of this year.
This week last year, the retail fuel margin average was $0.123 per gallon, a level where it remained the following week. That means the average retail fuel margin is now twice that of last year.
These are good times for the fuel retailer, where margins are gaining strength heading into Memorial Day weekend with its historical increase of volumes. But that doesn’t mean the fuel analyst can rest easy. There are still pennies to be gained and lost, and as volumes increase to peak levels during the upcoming vacation season, every strategic decision is amplified. You can’t manage what you can’t measure. Implementing a fuel price management solution like PriceAdvantage where you can quickly measure and analyze the wins and losses of the day, and then adjust strategies quickly, is critical to making the highest profits of the season.
by John Keller | May 16, 2014 | Fuel Pricing Strategy, Industry News
According to a recent NACS consumer survey of 1183 gasoline customers, more consumers are saying they’ll spend more money than otherwise expected this summer (25% of those surveyed) compared to less money than otherwise expected this summer (16% of those surveyed). In the midwest, 33% of consumers surveyed said they plan to spend more money than otherwise expected this summer, the highest percentage of any region in the US.
According to NACS, Americans are expected to average more than two summer vacation trips of at least two nights away from home, and the bulk of this travel will be by car. More than 8 in 10 consumers (84%) say that they will drive for a summer vacation.
In related news, CSNews reported that 2013 retail fuel volumes were up 1.6%.
From a fuel price management perspective, we can hope that the NACS consumer survey predictions hold true, and that retail fuel volumes will grow at least as much as they did in 2013.
