by John Keller | Feb 20, 2015 | Fuel Price Management, Industry News, Retail Fuel Margins
According to the Wall Street Journal today, we have an ongoing debate as to whether or not oil prices have hit rock bottom.
On one hand, we have seen the price of crude increase recently and now oil prices are back up above $50 a barrel. Oil producers in the US are reportedly cutting back on drilling, where the weekly count of rigs drilling for oil has dropped to the lowest level since August 2011, and oil companies have announced plans to lower their future spending. Aramco, the Saudi Arabia owned oil company, has announced they are considering cutting their future spending on production and exploration by up to 25%.
On the other hand, the US Energy Information Administration just announced that oil inventories increased by 7.7 million barrels in the week ending February 13. Their report said the US is on track to hit a 42 year high this month. Here we have an indication that output is not yet cutting back. And we’re in the middle of the annual February – March cycle where demand is at its lowest. In other words, oil supply continues to outweigh demand. Certainly it appears that in the near term, production will continue to keep us in an oversupply situation.
The ongoing US refinery strikes are three weeks old now, without any impact on gasoline prices. Refineries are hurt by roughly 200,000 barrels a day by the strike, and that amounts to a little over 1% of the daily US consumption which is 19 million barrels a day.
What does that mean from a fuel price management perspective? We’re seeing the traditional upward trend of springtime wholesale prices, along with upward trending retail fuel prices, and downward trending retail fuel margins. Gasoline futures also continue to rise. What remains to be seen is whether or not fuel volume demand repeats the strong numbers seen at the end of 2014. Retail fuel pricing competition remains strong, and the business is not for the weary. Retail fuel pricing software like PriceAdvantage is the way to the competitive edge.
by John Keller | Feb 2, 2015 | Fuel Price Management, Fuel Pricing Software, Fuel Pricing Strategy, Industry News, Retail Fuel Margins
Brian Milne, the Energy Editor at Schneider Electric presented some interesting statistics today, via Convenience Store Decisions. Here are the highlights:
- Wholesale spot market is up
- US Crude production growth is predicted to continue
- The traditional trend of the spring season is set to reverse the current 17 week string of declines in US retail gasoline prices
- Futures contracts are at a two year high pointing to expected gasoline price increases
- Amount of gasoline supplied to the primary market is higher than last year and five years ago (consumer demand is up)
- The highest two weekly averages of the year for gasoline supplied to the primary market were the last two weeks of the year
- Oil prices continue to drop on NYMEX
The seasonal trend of every spring time involves the transition from winter blends to summer blends, scheduled refinery shutdown due to scheduled maintenance, and anticipated increased volume usage as the weather improves and consumers drive more.
What does this mean from a fuel price management perspective?
We should see the increase in wholesale prices that we always see this time of year, even if oil prices continue to decline. That means strong retail fuel margins will be hard to come by. As NACS reported in their consumer survey today, consumers are willing to drive five miles out of their way to save five cents per gallon, and 65% of those surveyed said they had taken advantage of a discount such as a loyalty program.
We should also see a prolonged increase in retail fuel volumes as consumers are willing to drive more at current prices.
by John Keller | Jan 9, 2015 | Fuel Price Management, Fuel Price Optimization, Fuel Pricing Strategy, Fuel Software, Retail Fuel Margins
The OPIS report today revealed the average retail fuels margin across the US was $0.288 per gallon, down $0.047 from last week.
That is the third consecutive weekly decline, but the US retail average is still nearly double the margin of the equivalent week last year when the retail fuels margin was $0.146 per gallon. The six week average remains at a robust $0.326 per gallon. This is the fifth consecutive week when the six week average increased.
Last year at this time the retail fuel margin average bumped along the bottom until breaking above $0.20 per gallon the first week of March.
Perhaps the continued margin average decrease over the past three weeks is an indication that fuel marketers are now vying for volume and willing to sacrifice some of their margins. Only fuel pricing software like PriceAdvantage can allow the savvy fuel analyst to play the volume / margin game and make the most profit during these turbulent times.
by John Keller | Jan 7, 2015 | Fuel Price Management, Fuel Pricing Strategy, Industry News, Retail Fuel Margins
Today the Wall Street Journal reported that US Inventory data predicts gas prices will continue to fall. The article refers to a report that oil and fuel supplies have risen to a record high, pushing gasoline futures to a near six year low.
US stockpiles of crude oil and refined fuels are at the highest level ever, dating back to 1990. In addition, US consumption of petroleum fell slightly. “Gasoline inventories rose by 8.1 million to 237.2 million barrels, the highest level since February 2011, according to the EIA. Analysts expected an increase of 3.2 million barrels.” Nicole Friedman wrote.
Both gasoline and diesel futures are now at the lowest levels since 2009. From a fuel price management perspective, declining retail prices will mean decreased revenue, but if history repeats, increased fuels margins. However, during this season when retail fuel volumes are lowest, we will see retail fuel marketers sacrifice margin to gain volume where they can.
by John Keller | Jan 2, 2015 | Fuel Price Management, Fuel Price Optimization, Industry News, Retail Fuel Margins
The OPIS report today reported that the average US retail fuel margin started the new year at $0.335 per gallon. That margin is down $0.041 from last week, but a whopping $0.209 higher than the equivalent week last year when the average retail fuels margin was $0.126 per gallon.
The six week average was up $0.011 per gallon from last week and reached $0.321 per gallon.
Retail fuel prices across the US have been falling 99 days in a row, according to AAA. And there is no end in sight, with the cost of crude continuing to drop, and gasoline futures dropping as well.
What does this mean from a fuel price management perspective? It means these are the days of margins, when we need to make the best of the time given to us, knowing full well that the market cannot continue like this forever. Soon we’ll enter into the days of transition from winter to summer blends and scheduled refinery maintenance. Typically that means the season of wholesale cost increases and margin decreases.
We can make the best of these days by using fuel pricing software that allows us to react quickly in this volatile environment.
by John Keller | Dec 29, 2014 | Fuel Price Management, Fuel Pricing Strategy, Industry News, Retail Fuel Margins
The OPIS report showed for the week ending December 26 retail fuel margins across the US averaged at the highest levels of the year. The US average this week was $0.376, down only $0.005 per gallon from the previous week.
The year to date retail fuel margin average stands at $0.218, while the Q4 average is $0.303 and the six week average is $0.310.
The average margin at this point is a whopping $0.236 above the equivalent week last year. We’re finishing up 2014 with an overall retail fuel margin of the year that is $0.028 per gallon higher than the overall retail fuel margin of 2013.
From a financial earnings standpoint, the fourth quarter this year finished $0.103 above Q4 of 2013. Couple those improved margins with the increased fuels demand reported lately, and we can expect to see strong quarterly results by publicly traded fuel marketers in the coming months.
