by John Keller | Jun 8, 2011 | Fuel Price Management Solutions, Fuel Price Optimization, Fuel Pricing Strategy
The Baltimore Sun recently published this letter to the editor from an owner of a convenience store. It’s interesting to hear the fuel pricing problems this local retailer is dealing with, as people report that his fuel prices are 10 cents higher than the competition.
“I am one of the owners of Ray Adolph’s Citgo on York Road in Lutherville. Earlier this week, our station was mentioned in an editorial (“A dime’s worth of difference,” May 23) for having gasoline prices more than 10 cents higher than neighboring stations. While that was accurate, I would like to enlighten the general public as to what occurred that week.”
“On May 9, our station was posting a competitive price for fuel. But looking ahead, I saw on my supplier’s web site that the cost of fuel was going to be 10 cents per gallon higher on Tuesday and 20 cents by Wednesday. Guess when we needed to purchase a load of fuel? Bingo. Mid-day Wednesday was when the “liquid gold” was dropped in to my tanks, and that was 20 cents per gallon higher then my previous purchase.”
“I had not only purchased the gas at the highest price for the week, but I found out later it was the peak price for the day. By 6 p.m. Wednesday, May 11, the price had already dropped 6 cents. By Friday, it had dropped an additional 7 cents, or 13 cents in all since I bought gas. I called my salesman and he made a 10-cent adjustment on what I had just purchased. However, at the time of this writing (May 26), the cost has dropped 35 cents per gallon since I purchased it. Even with the 10-cent credit, I am still the highest price in the neighborhood.”
“Our Citgo not only sells fuel but has nine service bays for general auto repairs. Consumers assume that since our gas price is so high that we will be gouging people for service work. One has no bearing on the other. Up until this recent roller coaster ride in fuel pricing, we would be as competitive as we could with selling a gallon of gas. Our service prices are very competitive.”Brian K. Adolph, Lutherville
The writer is president of Ray Adolph’s Citgo.
See the link below to read the article on the Baltimore Sun site:
http://www.baltimoresun.com/news/opinion/bs-ed-citgo-20110527,0,3108800.story
As I speak with Fuel Managers across the country, they tell me pricing fuel didn’t use to be as hard as it is today. In the 1970’s it was common to have the same fuel cost for an entire month. In the early 1980’s, there would be a new fuel cost every day, but prices never changed more than a few cents day to day. These days Fuel Price Management includes handling wholesale fuel cost swings of $.20-$.30 down one day, followed by $.20-$.30 up the next.
Blame it on fuel commodity speculators if you want, but fact is, the dramatic fluctuation of fuel costs coupled with the high consumer scrutiny of retail fuel prices has made Fuel Price Management more difficult than ever. The answer is to implement fuel price management solutions that allow for rapid monitoring of cost changes, tracking competitor retail price responses, and accelerating speed to the street to enforce the right price to the right store at the right time.
by John Keller | May 25, 2011 | Fuel Price Management, Fuel Price Optimization, Fuel Pricing Strategy
The fuel price speculative bubble is over, and the market is correcting now, according to Stephen Schork, president of Pennsylvania-based energy consultant The Schork Group Inc.
Bloomberg Business Week today reported that pump prices were $1.66 a gallon over crude oil futures in New York on May 6, the largest premium since September 2008, according to data compiled by Bloomberg. That compares with an average of 95 cents in the past five years. In 2008, it took two months for the gap to return to average.
The $4 per gallon U.S. gas prices are deterring motorists from driving, causing a 2% decrease in demand compared to last year, and likely a lower fuel prices by July. While gasoline prices may not be down by Memorial Day on May 30, history suggests they will be lower by July 4, when 32 million typically take to the roads for the Independence Day holiday.
From a Fuel Price Management perspective, that means volumes may be lower in May, but are likely to increase just as wholesale costs decrease, along with retail fuel price averages.
Read the complete Bloomberg article here.
by John Keller | May 13, 2011 | Fuel Price Management, Fuel Price Optimization, Fuel Pricing Strategy, Industry News, Retail Fuel Margins
There’s a great MSNBC news article out today discussing the role of the US Federal Government in helping fuel prices trend downward. The key takeaway for the Fuel Price Manager is that fuel prices are going to continue their downward trend of recent days. From a Fuel Price Management perspective, that means it’s a critical moment to invest in fuel pricing solutions that allow the continued monitoring of wholesale costs, and the competitor fuel price reaction. As cost drops, now is the time to increase retail fuel profits, while carefully managing the gradual fuel price decreases that the consumer expects.
News agencies are making it common public knowledge that retail fuel prices are quick to rise when wholesale costs increase, and slow to drop when wholesale costs decrease. But these agencies are setting customer expectations for retail fuel prices to drop over the coming months. That means people will be looking for price decreases, and will be quick to jump on them with a fill-up when they see a well-advertised price.
Here are highlights from the article:
- Oil prices have peaked and appear to be coming down.
- After flooding the financial system with cash for more than two years in an effort to stabilize financial markets and economy, the Fed is getting ready to turn off the taps. The anticipation is one reason oil prices are coming back down.
- For all of the complex forces acting on the global oil market, the dollar has a powerful sway for the very simple reason that oil is priced in dollars. The dollar has begun showing signs of strength. Just as a weaker dollar helped send oil prices surging, a stronger dollar is reining them in.
- The forces that drove prices higher seem to have reversed course. Global growth seems to be slowing. The dollar is strengthening. And the inflation threat from the Fed’s easy-money policies may be easing.
- Until the outlook for oil prices becomes clearer, expect more daily price swings that will send even the most seasoned traders looking for cover.
The full article may be found here.
by John Keller | Apr 12, 2011 | Fuel Price Management, Fuel Pricing Strategy, Industry News
In today’s US Energy Information Adminstration weekly fuel price report, the USEIA revealed an $.11 increase for the national average price of Unleaded Regular fuel. The US national average retail fuel price of unleaded gasoline now sits at $3.79/gallon, a gallon of midgrade rose to $3.90, and a gallon of premium rose to $4.02. That’s the first time the national average for premium fuel has been priced above $4 for years. These are the highest fuel price levels since September 2008.
The regional areas hit hardest were the Gulf Coast and the Midwest, where the average price for unleaded rose $.12 to $3.66 and $3.90/gallon respectively. The lowest increase of any region was $.07 in the Rocky Mountains, where a gallon of unleaded fuel averages $3.57.
As for individual states, Minnesota had the largest fuel price increase of the week, where prices rose $.23/gallon for unleaded, with an average price of $3.82/gallon.
The average price of Unleaded in California remained the highest in the nation, reaching $4.20/gallon. In Los Angeles and San Francisco, a gallon of Unleaded is priced the highest in any major city, at $4.23 and $4.22 per gallon.
by John Keller | Mar 14, 2011 | Fuel Price Management, Fuel Pricing Strategy, Retail Fuel Margins
In today’s US Energy Information Adminstration weekly fuel price report, the USEIA revealed another $.04 increase. The US national average retail fuel price of unleaded gasoline now sits at $3.56/gallon, a gallon of midgrade rose to $3.69, and a gallon of premium rose to $3.80. Fuel prices have now risen $.42 in the last month, and are now at their highest level since September 2008.
The regional area hit hardest was the West Coast, where the average price for unleaded rose $.08 to $3.84. Next was the Rocky Mountain region where unleaded rose $.06 to an average price of $3.35, though fuel prices are still the lowest there than in any other region. The lowest increase of any region was $.03 in the Gulf Coast, where a gallon of unleaded is $3.43.
As for individual states, Ohio had the largest fuel price increase of the week, where prices rose $.09/gallon for unleaded, with an average price of $3.54/gallon.
In Los Angeles and San Francisco, a gallon of Unleaded is priced at $3.97 and $3.96 per gallon. Mid-grade in these cities is now priced above $4.00 for the first time in recent history, at $4.07/gallon.
by John Keller | Mar 11, 2011 | Fuel Pricing Strategy, Retail Fuel Margins
Alon USA in their management reports revealed their retail fuel margin results for Q4 2010 and for the entire 2010 fiscal year.
Management reported retail fuel margins for the fourth quarter were 14.8 cents per gallon, versus 10.8 cents in the fourth quarter of 2009. Retail fuel margins for the entire 2010 fiscal year hit 12.9 cents per gallon, compared to 13.9 cents per gallon in FY2009.
The annual fuel volume per site per month was 39,000 gallons. According to NACS, the average c-store sells 121,000 gallons of fuel per month annually. That means Alon stores sold about one-third of the national monthly average.
The total number of stores at the end of the fiscal year was 304, four stores fewer than in 2009. Alon USA is the largest 7-11 Licensee in the US, operating sites across the southwest under the FINA brand.
