by John Keller | Dec 3, 2013 | Industry News, Retail Fuel Margins
The latest OPIS report reveals that retail fuel margins across the US dropped again this week. Average retail fuel margins were down $0.013 per gallon and now stand at $0.129 per gallon. That’s the fourth consecutive loss, and retail fuel margin averages are now at the lowest level since July 19 of this year.
The year to date average now stands at $0.189 per gallon, while the Q4 average is at $0.205 per gallon. The six week average is now at $0.195.
This is the second consecutive week that retail fuel margins this year are below the equivalent day of last year. In 2012, the average retail fuel margin was $0.167 per gallon. Last year average retail fuel margins rose $0.07 per gallon over the first three weeks of December, before dropping $0.11 per gallon the last week of the year.
by John Keller | Nov 25, 2013 | Customer News, Fuel Price Optimization, Fuel Pricing Software, Industry News, Retail Fuel Margins
In a recent update, J.P. Morgan announced they will begin financial coverage of CST Brands and Murphy USA. In their initial report, they make specific mention of their preference to the CST Brands strategy of focusing on higher margin in-store merchandise through larger store formats. The reason they gave was “Against a backdrop of stagnant gasoline demand and volatile fuel margins, the industry appears to be focused on growing higher-margin, in-store convenience merchandise through larger store formats. We prefer CST’s growth story, with new format stores driving margin growth over time and reducing the company’s dependence on fuel margins.”
In a blog dated November 14, 2013, I wrote about the correlation between fuel volumes an in-store sales. PriceAdvantage now allows you to select an unlimited number of product categories from an imported set of data from PDI, and run a report showing the correlation between retail fuel volumes and retail fuel prices with the selected data. That means you can see how fuel promotions impact in-store product category sales, along with the number of in-store transactions. You can even see how promotions of one in-store product category impact sales of another in-store product category, along with fuel volumes and fuel prices.
Clearly this strategic thinking is inline with what J.P. Morgan rewards. CST Brands has been a loyal PriceAdvantage customer since 2012. Does your fuel software allow you to investigate these correlations and maximize both fuel and in-store margins?
by John Keller | Nov 23, 2013 | Industry News, Retail Fuel Margins
OPIS reported today that average US retail fuel margins dropped by $0.08 per gallon this week to levels last seen in July of this year. The average retail fuel margin in the US now stands at $0.142 per gallon which is $0.10 per gallon lower than the beginning of the month. The six week average dipped to $0.204 per gallon and the average for Q4 lost one cent to $0.214 per gallon.
The last time retail fuel margins were below $0.15 per gallon was July 19, when retail fuel margins were at $0.10 per gallon. This week last year, the average retail fuel margin across the US was $0.192 per gallon. Last year at this time we saw one more week of margin declines, followed by three weeks of steady increases in December. In 2012 retail fuel margins ended the year at $0.132 per gallon.
Hopefully we’ll see this three week trend of decreases end soon and get a rebound heading into December.
by John Keller | Nov 21, 2013 | Fuel Pricing Technology, Industry News, Retail Fuel Margins
Hyundai just announced that beginning in the spring of 2014, they will make available hydrogen fuel cell vehicles in the limited US markets of Los Angeles and Orange County. Hyundai will offer these vehicles through selected dealers for $499/month over a 36 month term, with $2999 down. Perhaps the most interesting aspect of the offer is that the deal comes with unlimited free hydrogen refueling. That part of the deal is designed to remove any range anxiety of the potential buyer, something that continues to inhibit many who are considering buying electric vehicles. And if there is ever a problem with the fuel cell, Hyundai will pickup the vehicle and provide a loaner, then deliver the vehicle back to the customer’s home or business at no charge after the service is complete.
The initial set of dealers are in Tustin, Anaheim, Carson, and Van Nuys. More Hyundai dealers will follow as the program gains traction and spreads across the US as more hydrogen refueling stations are made available. According to the California Station Map, in California there are currently 9 hydrogen fueling stations available to the public, 19 hydrogen fueling stations in development, and 12 stations that are private or for demonstration purposes.
The announcement from Hyundai touts the advantages of fuel cell vehicles, calling them the next generation of electric vehicles. Not only do these vehicles provide a 300 mile driving range, comparable to petroleum based vehicles, but they are rated lower than electric vehicles for their well-to-wheel emissions rating. And here’s the kicker for the c-store fuel manager: these vehicles are capable of refueling in under 10 minutes, “similar to gasoline”, according to the Hyundai announcement.
No doubt this is a program geared toward the early adopter. And it’s not likely that next year will be the year to add hydrogen fuel to your fuels portfolio. But it is an important milestone to record; from here on in we will watch the reality of hydrogen fuel cell vehicles unfold into mainstream.
Yet to be determined: what kind of margins can the retail fuel marketer expect to see in a hydrogen fuel offering?
by John Keller | Nov 21, 2013 | Fuel Price Management, Fuel Pricing Technology, Industry News, Retail Fuel Margins
Today Ford announced that the first 2014 model F-150 that can run on either CNG or LPG is now rolling off the assembly line. With the combined gasoline and CNG, the range of the F-150 will be up to 750 miles, with an estimated mileage rating of 23 mpg highway and 19 mpg city. Ford is now the first manufacturer to offer a CNG / LPG capable half-ton pickup.
Natural gas upfits can range from $6000 to $9500 depending on tank capacity. At the time of this posting, the national average for unleaded fuel is $3.29 while the average for CNG is $2.10. Nearly 20 states in the US offer tax incentives or rebates for CNG converted vehicles. These vehicles are being targeted toward the business and fleet buyer. For example, in Florida, the fleet buyer can take advantage of $25,000 in rebates starting next year.
Ford also announced that by summer of 2014, they will be offering eight commercial vehicles with a natural gas prep option, more than any other full-line manufacturer.
Besides the advantage of a lower cost per gallon, natural gas also burns more cleanly and 85% of natural gas is produced in the US.
Add this all up for the convenience store fuel retailer, and it’s yet another indicator that natural gas is gaining momentum as an alternative fuel option. Is it time to consider adding it to your fuels portfolio?
by John Keller | Nov 18, 2013 | Customer News, Fuel Price Optimization, Fuel Pricing Strategy, Fuel Pricing Technology, Fuel Software, Retail Fuel Margins
In the latest financial report from CST Brands, for the fiscal quarter ending September 30, 2013, there is an interesting note about how the company has shifted its fuel pricing strategy since the spin-off from Valero.
On page 37 of the report, there is a paragraph under the title “Motor Fuel Strategy”:
“Prior to the separation and distribution, our business existed as an outlet for our former parent’s products and the focus was on maximizing consolidated parent company profitability. Occasionally, we priced motor fuel with the overall objective of increasing motor fuel gallons sold with less emphasis on retail motor fuel gross margin. This resulted in a higher profit generated by our former parent’s refining segment, which was beneficial to their consolidated earnings performance. As a separate company, we generally manage our motor fuel pricing to maximize motor fuel gross margin. This strategy, from time to time, may result in different motor fuel gallons sold from historical levels as a result of our being separated from our former parent company.”
The change in the CST Brands motor fuel strategy is evident in these numbers:
Fuel volumes, in gallons per site per day: 5,003 in Q3 2013 vs. 5,131 in Q3 2012
Fuel margins, in cents per gallon before credit card fees: $0.20 in Q3 2013 vs. $0.13 in Q3 2012
Unlike with other c-store chains which announce changes in fuel pricing strategies and then deliver results that conflict with their goals, CST Brands delivered results completely in line with their new mission as a new company.
From a fuel price management perspective, corporate fuel strategies will change in emphasis from time to time. CST Brands has been successfully using PriceAdvantage as their exclusive fuel pricing software for all their company owned stores since 2012, first under the Valero parent which had one retail fuel objective focused on volumes, now as their own CST Brands entity with the new fuel objective focused on price and margin optimization.
As one of our customers told me after I congratulated him on the strong quarterly results of his company, “A great product yields great results.”
Do you have the fuel pricing software that allows you to deliver great results no matter what corporate objective, like CST Brands does?
