by John Keller | Aug 27, 2012 | Fuel Pricing Strategy, Industry News
BP has temporarily stopped distributing Premium and Midgrade gasoline to the Chicago area in order to further test the fuel from the Milwaukee terminal. Regular unleaded gasoline has already passed these quality tests and is in distribution to Northwest Indiana, Chicago, and Milwaukee.
BP reported to CBS news that 10,000 consumers have contacted BP to report issues caused by the bad fuel.
From a fuel price management perspective, BP dealers need to continue to recognize the bad public relations this mistake has caused, and use their fuel price optimization software to annotate this event in their records for future reference. Dealers selling a fuel brand other than BP may be able to adjust their fuel price optimization strategy to increase their retail fuel margins during this time when BP has such PR issues, and BP premium and midgrade is scarce.
by John Keller | Aug 21, 2012 | Fuel Pricing Strategy, Industry News
A number of articles in the press are proclaiming that experts predict retail gasoline prices will drop after Labor Day. For example, in the Houston Chronicle, Tom Kloza, the chief oil analyst at OPIS is quoted as saying “I suspect the last 100 days of the year will see a strong trend toward lower retail gas prices. That may be the case even if crude drifts a bit higher.”
The most common reasons given for the predicted lower gasoline pricing is the decreased demand after the summer months, and the seasonal shift to less expensive winter blends. Of course those in the industry know this is the standard pattern for retail gasoline prices every year.
From a fuel price management perspective, the fuel manager’s gasoline pricing strategy should include the expectation of a downward trend in retail fuel prices. That’s what the consumer is now expecting.
by John Keller | Aug 21, 2012 | Fuel Pricing Software, Fuel Pricing Strategy
Today BP issued a public recall of 2.1 million gallons of gasoline produced by the BP Whiting refinery near the Indiana – Illinois border. Hundreds of reports of car trouble have flooded Northwest Indiana repair shops caused by contaminated gasoline that had higher than normal levels of polymeric residue.
BP is advising that anyone who has encountered car trouble because of their bad gasoline should hold onto their receipts, as BP needs a record of a credit or debit card purchase to provide a refund. Customers are also advised to document any repairs made to their cars because of the bad fuel. Any customer who paid cash needs to get a mechanic to get a fuel sample from his or her car, so BP can verify where it came from. BP has assigned 90 phone operators to staff a customer hotline fielding complaints by customers of the bad fuel.
From a fuel price management perspective, fuel managers offering brands other than BP in this market need to make the most of this opportunity with their gasoline pricing strategy to optimize their retail fuel margins. Fuel managers offering the BP fuel brand in this market need to monitor their volumes and mitigate their losses. This story has been carried by CBS News and the Chicago Tribune among other major media outlets, so the word is spreading quickly to the mid-west markets and potentially across the entire US. As a result, consumers will be leery of the BP fuel brand, and will be looking elsewhere to fill up. Competitors to BP may decide to leave their gasoline prices competitive to steal market share from the BP fuel brand. Or BP competitors may make the decision to maintain a slightly higher gasoline price for their brand with the expectation that former BP customers are willing to pay more for trusted gasoline.
In any event, it is critical for fuel price optimization software to allow the fuel manager to record the circumstances around this week for historical reference, so next quarter, and next year, the fuel management team can point to specific reasons why this week, and the weeks thereafter, are different than other weeks on the calendar.
by John Keller | Aug 17, 2012 | Fuel Pricing Strategy, Industry News
According to an article in the LA Times, the gasoline price increases caused by the Chevron Richmond refinery fire are likely to stop. A spokesman for the Automobile Club of Southern California was quoted as saying “It appears that wholesale gasoline buyers feel that for now, they have captured most of the cost increase that will result from the fire.”
From a fuel price optimization strategy standpoint, the gasoline pricing strategy needs to take into consideration the consumer expectation that gasoline prices are not likely to keep increasing. Fuel price optimization software needs to be able to annotate the historical event of the Chevron Richmond refinery fire, to allow the specific dates of the fire and the market impact to be easily recalled next year.
by John Keller | Aug 16, 2012 | Fuel Price Management, Fuel Pricing Strategy, PriceAdvantage
In the Q3 financial release from The Pantry, the CEO included a statement regarding how the c-store chain plans to improve their retail fuel margins and volumes. From the press release: “The company is implementing a fuel-pricing technology that will be designed to track and project street postings, to be more responsive to market elasticity, Hatchell said, adding that the software is currently “learning” to do its job by building sales histories and collecting data.”
This statement speaks to a critical component of an effective fuel price optimization strategy: rapid responses to fuel price changes in the retail market. Retail fuel prices in 2012 have been exceptionally dynamic and rapid. The Houston market saw a one day $0.20 price increase this year, something usually only seen once a career. It is easy for stores to be left behind when the first movers in a market make their price change. Lagging behind can result in missed opportunities, lost business, and even negative margins.
One way to maintain quick responses to market changes is to view OPIS Radius report content in your Fuel Price Management software. In PriceAdvantage, it is simple to compare the gasoline pricing reported by OPIS to what is reported by the store managers, in a “survey says vs. OPIS says” user interface. This keeps the store managers honest with their survey reporting, and alerts the Fuel Manager when a price change occurred that the store manager may have missed.
A second way to maintain quick responses is to automate the price change process to the street. This is the basis of what PriceAdvantage was built on from day one, replacing a manual phone call and fax process, with a one-button-click price change push to the store sign, POS and pump. Confirmation messages back complete the closed loop to make sure the price change was successful.
The third way to remain nimble in the retail fuel market is to post the latest store prices to all virtual mapping applications. GasBuddy and OPIS are the two content providers to virtually every gas price mapping application in the market. PriceAdvantage customers such as Valero and Rutter’s have already recognized the benefits of posting their latest gas prices online.
As the competition for retail fuel continues to get tougher, there will be winners and losers. A robust fuel price management software will allow the winners to execute an optimized gasoline pricing strategy, and become dominant winners in each retail fuel market.
by John Keller | Aug 15, 2012 | Fuel Pricing Strategy, Industry News
US EIA predicts 2012 retail gasoline prices to match 2011 prices
In the US Energy Information Administration Short-term Energy Outlook report for August, the agency predicts 2012 retail regular unleaded gasoline prices to match 2011 prices of $3.53 per gallon. In 2010 retail prices for regular unleaded gasoline were $2.78 for the year. The US EIA predicts 2013 retail gasoline prices for regular unleaded to dip down to $3.33 per gallon.
These predicted gasoline prices are based on the assumption that Brent crude will average $103 per barrel for the second half of 2012, and $100 per barrel for all of 2013. These gasoline price forecasts also assume that world oil-consumption-weighted real gross domestic product (GDP), which increased by 3.0 percent in 2011, grows by 2.8 percent in 2012 and 2.9 percent in 2013.
From a gasoline pricing strategy and a fuel price management perspective, if these predictions hold true, the overall size of the retail gasoline fuel market is likely to remain steady because drastic gasoline price increases to the $4 threshold are not within sight for the next 18 months.
