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.
The Bespoke Investment Group issued a statement saying that despite crude prices topping $100 a barrel today, retail fuels prices are not likely to rise in response. That’s because Bespoke says retail fuels prices have been responding much more closely to changes in Brent crude, than with WTI. And Brent crude has not gone up in price.
“As long as Brent crude continues to underperform WTI crude, rising oil prices will be less of a drag on US consumers than they have typically been in the past,” Bespoke wrote.
From a fuels price management perspective, this is important because fuel analysts may choose to stop tracking WTI prices, and instead focus on the performance of Brent crude, when anticipating future price moves.
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.
Retail fuels prices are expected to decline through the rest of 2011, according to today’s Short-Term Energy Outlook report from the US Energy Information Administration.
So far this year, regular unleaded monthly average gas prices have dropped $.46/gallon from their highest point in 2011 back in May, when the average fuel price for that month was $3.91 per gallon. The US monthly average fuel price for regular unleaded in October was $3.45 per gallon.
If the US EIA prediction proves to be true, from a fuels price management perspective these last 7 months of the year offer opportunities for fuel price optimization that will increase fuel margins and increased fuels profitability.
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.
