by John Keller | Mar 22, 2012 | Fuel Price Management, Industry News
In the March 21, 2012 issue of the Convenience Store News Special Features > Business Focus, the section “Issues and Leaders with Don Longo” is an interview with Greg Parker of The Parker Companies, a PriceAdvantage customer.
The Parker Companies uses PriceAdvantage in the cloud for their fuel price management of 27 convenience stores in South Carolina and southeast Georgia. In the interview, Don Longo lists fuel price management software among the key industry-leading latest technology programs in place at The Parker Companies. Mr. Parker explains how critical managing the price of fuel is to the business, given the current market conditions.
Longo: Please comment on the most significant developments relating specifically to the convenience industry.
Parker: As the number of stores increases and the overall consumption of gas decreases, there is greater competition in our industry than ever before. Gas consumption has decreased by 4.5 percent as consumers drive more fuel-efficient vehicles and become more mindful of their driving habits in light of high gas prices. Everyone is fighting for a greater market share, which means everyone has to get better at what they do. To me, this is an inspiring development in our industry because it forces everyone to step up their game.
The CSN interview may be found here.
by John Keller | Mar 22, 2012 | Industry News, Retail Fuel Margins
According to CSP Daily News, the convenience store industry is facing the lowest retail fuel margins in years. Lower retail fuel margins so far in 2012 are a result of wholesale fuels costs rising more rapidly than retail fuels prices.
During the last week of February 2012, retail fuel margins were the lowest in over two years.
“Estimates of January retail fuel margins by publicly owned c-store companies showed gasoline margins for the month decreased 15% compared to the previous year…”. The article continued “National retail fuel margins averaged 12.9 CPG for the month of January, down approximately 2.3 CPG year over year.”
From a fuel price management perspective, it’s clear there is only one way to stay afloat: carefully monitor the daily and even hourly changes in fuels costs, monitor competitor retail fuel prices hourly, and quickly implement fuel price changes to optimize retail fuel margins. C-store chains relying on the outdated methods of spreadsheets, emails and phone calls simply can’t keep up with today’s wildly dynamic retail fuel pricing environment.
The original CSP Daily News article may be found here.
by John Keller | Mar 20, 2012 | Fuel Price Management, Fuel Price Management Solutions
We’re now in a time of survival of the fittest, where only the strongest c-store chains in the retail fuel business will survive. An article in Convenience Store News today references the sale of another c-store chain, this time one that had been in business for 27 years. The original owning family cites a completely business environment – gas prices and competition are up, but fuel margins are down.
From a fuel price management perspective, this sale is just one more indicator of how tough it is out there, and how much an effective fuel price management solution is needed. Without a complete fuel price management technology solution to effectively monitor and manage volumes, competitor and store pricing, and daily retail fuel margin, a chain simply can’t compete. It’s too tough of an environment to take too long to respond to competitor and cost changes, and to miss the retail fuel margin windows of opportunity.
While it’s one thing to come up with what the fuel prices should be at each of your stores, it’s completely different to know when the price changes actually took effect. What good is it to know what the prices should be, when the prices don’t hit the street until 5 to 7 hours later, and you’ve missed your window? Fuel price change confirmation is critical to the entire fuel price management cycle.
The Convenience Store News article may be found here.
by John Keller | Mar 13, 2012 | Fuel Pricing Strategy, Industry News
The Centre for Global Energy Studies predicts Brent Crude prices to drop 20% over the next three years. While today Brent Crude trades in the neighborhood of $125 a barrel, the Centre predicts Brent Crude to drop to $112 a barrel by the end of 2013, $100 a barrel in 2015, and $95 a barrel by the end of 2016.
The drop in Brent Crude prices is attributed to the wide range of new discoveries throughout the world. “The world has become a very exciting place for energy and there are possibilities everywhere,” said B.C. Tripathi, chairman of GAIL India Ltd. (GAIL), the country’s biggest natural-gas distributor. “Our options to get oil and gas now range from America to Australia.”
Spending on oil and gas exploration rose to a record $72 billion last year, as drillers look to replace aging fields with finds in countries with little or no history of oil production. Shell is increasing their exploration budget by 35%, and BP is doubling their exploration this year.
The U.S. may surpass Russia as the world’s largest energy producer in the next 10 years as output of natural gas and crude from shale rock formations climbs. China, the world’s biggest energy consumer, is estimated to have more gas trapped in shale than the U.S. and plans a second auction of shale exploration areas as it seeks to triple its use of gas to 10 percent by 2020. Other exploration projects include Tanzania, French Guiana, Angola, Argentina, Guyana, and Ireland.
“The price of oil has to come down because supply prospects are so positive,” said Manouchehr Takin, an analyst at the Centre for Global Energy Studies. “The rate of demand isn’t going to grow as in the past as we use resources more efficiently.”
It takes four to eight years from exploration to bringing supply to the market. Then it takes 3-6 months for crude oil to make its way through the refining process and make it into retail fuel prices. All things being equal on the refining side, a drop in Brent Crude from $125 a barrel to $112 per barrel would reflect a retail fuel price drop of $0.43 a gallon. A drop in Brent Crude to $95 a barrel would reflect an additional retail fuel price drop of $0.56 a gallon.
From a fuel price management perspective, we can expect continued volatility in retail fuel prices over the next five to ten years.
Bloomberg Businessweek reported this article here.
by John Keller | Mar 13, 2012 | Fuel Price Management, Retail Fuel Margins
According to the US EIA, average unleaded retail fuel prices across the US rose another $0.03 a gallon this week. Hardest hit was the Rocky Mountain region where the average price for unleaded fuel rose $0.14 a gallon. Fuel prices in the Rocky Mountain region are still the lowest in the country, averaging $3.47 a gallon, $0.17 a gallon less than the next lowest region which is the Gulf Coast where the average gallon of unleaded is $3.647.
Average fuel prices increased in every region except New England, where the average price of a gallon of unleaded dropped $0.01 to $3.809.
by John Keller | Mar 12, 2012 | Fuel Pricing Strategy, Industry News
If the proposed Federal government Corporate Average Fuel Economy standards of 54.5 mpg in 2025 are adapted, there would be a reduction in retail fuel consumption of 44% . In other words, nearly half of the retail fuel transactions would be gone in 13 years.
And though electric autos are beginning to come to market, information provided by the US Department of Energy leads NACS to project that even as far into the future as 2035, we will see liquid fuels making up 96% of the energy used to move American consumers.
From a fuel price management perspective, we can expect retail fuel demand trends to continue their decline far into the future, and retail fuel pricing to continue to be more and more competitive. Though there will be fewer fuel transactions, by and large the fuel transactions will be liquid based, not electric plug-ins. The c-store fuel business continues to be a volume game, and fuel pricing software is critical for monitoring performance against retail fuel volume targets, and adjusting margins to maintain the competitive edge that allows stores, markets, and regions to hit the volume targets throughout the entire year.
NACS Online has a great video explaining the future of fuels on their website here.
