Albertsons is getting out of the fuels business and selling 51 stations across seven states to Tesoro. From a fuels price management perspective, this means competitor strategies and daily volumes will need to be closely watched as these Albertson stations are rebranded. Over time it’s likely there will be some market reaction and change of customer behavior as the Tesoro flag is waved at these locations.
Mondial Assistance conducted a phone survey of 1000 adults over age 18 in the US and issued a report that holiday travel will be up by 7% this year, from 50% in 2010 to 57% in 2011. Car travel makes up 56% of all holiday travel.
From a fuels price management perspective, this is an indicator that the upcoming holiday season is likely to have increased fuels volume sold as compared to last year.
In Spartanburg, SC, another fuel price war was initiated by a c-store grand opening. Promotional temporary fuel prices for a new QuikTrip caused a race to the fuel price basement. In response to the promotional pricing, the nearby Raceway and Kangaroo lowered their fuel prices, resulting in some of the lowest prices in the country, with unleaded fuel at one point hitting bottom at $2.80 per gallon. That was enough to cause unnatural traffic patterns to the point where state officials needed to be called in to solve the traffic problem.
This price war started over a month ago back in October, and still has a ripple effect in Spartanburg. GasBuddy reports as of today seven c-stores with unleaded fuel priced below $3.00 per gallon, with two stores at $2.83. The remaining 44 c-stores in Spartanburg are priced anywhere from $3.00/gallon to $3.35/gallon.
From a fuel price management perspective, it’s another lesson learned there is no substitute for fuel pricing analysts keeping up with local field market intelligence, and using human insight when setting optimized fuel prices. The retail fuel price market has too many unexpected influences that drive prices out of traditional patterns.
The announcement today from Alon Brands Inc. saying they will end the 51-year-old FINA fuel brand and replace it with the brand ALON is a case in point of just how dynamic the retail fuel pricing market is. From a fuel price management and fuel pricing strategy perspective, fuel analysts will need to carefully monitor the market reaction to this fuel branding transition.
Fuel Price Management software like PriceAdvantage is critical for allowing fuel pricing analysts to navigate their way through this transition, by monitoring the daily fuel volumes imported from PDI, tracking the competitor pricing strategies in each market from store surveys and OPIS, and adjusting fuel pricing strategies to maintain optimized prices at every store.
The US EIA today reported a third straight week of dropping retail fuel prices. Average fuel prices across the US dropped $.03 across the board for Regular, Midgrade and Premium this week. There were fuel price drops across every US EIA region, with the biggest price drop in the Midwest at $.05 this week. The US EIA report on a state basis showed only California had a price increase for Regular, with a $.01 rise to $3.85 this week.
The US average price for Regular has dropped $.05 per gallon from $3.47 on 10/17/11 to $3.42 today.
Tesoro reported in their Q3 earnings report that retail fuel margins were down $.06 from the same three months in 2010. In 2011 the three months retail fuel margins were at $.16 compared to $.22 for the same period in 2011. For the nine months ended this period, retail fuel margins were at $.18 compared to $.22 from the same nine months in 2010.
The monthly fuel volume per store for these three months was 114,961 gallons. The total number of Tesoro c-stores for this three month period is 1186, up from 880 in 2010.
For the 376 company-operated stores, average fuel sales was 169,326 gallons per month.
According to NACS, the average US c-store sells 121,000 gallons of fuel per month annually. That means over the past three months, Tesoro company-owned stores sold about 40% more than the US national monthly average, while dealer stores sold about 26% less than the US national monthly average.