by John Keller | Aug 21, 2012 | Fuel Pricing Software, Fuel Pricing Strategy
Today BP issued a public recall of 2.1 million gallons of gasoline produced by the BP Whiting refinery near the Indiana – Illinois border. Hundreds of reports of car trouble have flooded Northwest Indiana repair shops caused by contaminated gasoline that had higher than normal levels of polymeric residue.
BP is advising that anyone who has encountered car trouble because of their bad gasoline should hold onto their receipts, as BP needs a record of a credit or debit card purchase to provide a refund. Customers are also advised to document any repairs made to their cars because of the bad fuel. Any customer who paid cash needs to get a mechanic to get a fuel sample from his or her car, so BP can verify where it came from. BP has assigned 90 phone operators to staff a customer hotline fielding complaints by customers of the bad fuel.
From a fuel price management perspective, fuel managers offering brands other than BP in this market need to make the most of this opportunity with their gasoline pricing strategy to optimize their retail fuel margins. Fuel managers offering the BP fuel brand in this market need to monitor their volumes and mitigate their losses. This story has been carried by CBS News and the Chicago Tribune among other major media outlets, so the word is spreading quickly to the mid-west markets and potentially across the entire US. As a result, consumers will be leery of the BP fuel brand, and will be looking elsewhere to fill up. Competitors to BP may decide to leave their gasoline prices competitive to steal market share from the BP fuel brand. Or BP competitors may make the decision to maintain a slightly higher gasoline price for their brand with the expectation that former BP customers are willing to pay more for trusted gasoline.
In any event, it is critical for fuel price optimization software to allow the fuel manager to record the circumstances around this week for historical reference, so next quarter, and next year, the fuel management team can point to specific reasons why this week, and the weeks thereafter, are different than other weeks on the calendar.
by John Keller | Aug 17, 2012 | Fuel Pricing Strategy, Industry News
According to an article in the LA Times, the gasoline price increases caused by the Chevron Richmond refinery fire are likely to stop. A spokesman for the Automobile Club of Southern California was quoted as saying “It appears that wholesale gasoline buyers feel that for now, they have captured most of the cost increase that will result from the fire.”
From a fuel price optimization strategy standpoint, the gasoline pricing strategy needs to take into consideration the consumer expectation that gasoline prices are not likely to keep increasing. Fuel price optimization software needs to be able to annotate the historical event of the Chevron Richmond refinery fire, to allow the specific dates of the fire and the market impact to be easily recalled next year.
by John Keller | Aug 16, 2012 | Fuel Price Management, Fuel Pricing Strategy, PriceAdvantage
In the Q3 financial release from The Pantry, the CEO included a statement regarding how the c-store chain plans to improve their retail fuel margins and volumes. From the press release: “The company is implementing a fuel-pricing technology that will be designed to track and project street postings, to be more responsive to market elasticity, Hatchell said, adding that the software is currently “learning” to do its job by building sales histories and collecting data.”
This statement speaks to a critical component of an effective fuel price optimization strategy: rapid responses to fuel price changes in the retail market. Retail fuel prices in 2012 have been exceptionally dynamic and rapid. The Houston market saw a one day $0.20 price increase this year, something usually only seen once a career. It is easy for stores to be left behind when the first movers in a market make their price change. Lagging behind can result in missed opportunities, lost business, and even negative margins.
One way to maintain quick responses to market changes is to view OPIS Radius report content in your Fuel Price Management software. In PriceAdvantage, it is simple to compare the gasoline pricing reported by OPIS to what is reported by the store managers, in a “survey says vs. OPIS says” user interface. This keeps the store managers honest with their survey reporting, and alerts the Fuel Manager when a price change occurred that the store manager may have missed.
A second way to maintain quick responses is to automate the price change process to the street. This is the basis of what PriceAdvantage was built on from day one, replacing a manual phone call and fax process, with a one-button-click price change push to the store sign, POS and pump. Confirmation messages back complete the closed loop to make sure the price change was successful.
The third way to remain nimble in the retail fuel market is to post the latest store prices to all virtual mapping applications. GasBuddy and OPIS are the two content providers to virtually every gas price mapping application in the market. PriceAdvantage customers such as Valero and Rutter’s have already recognized the benefits of posting their latest gas prices online.
As the competition for retail fuel continues to get tougher, there will be winners and losers. A robust fuel price management software will allow the winners to execute an optimized gasoline pricing strategy, and become dominant winners in each retail fuel market.
by John Keller | Aug 15, 2012 | Fuel Pricing Strategy, Industry News
US EIA predicts 2012 retail gasoline prices to match 2011 prices
In the US Energy Information Administration Short-term Energy Outlook report for August, the agency predicts 2012 retail regular unleaded gasoline prices to match 2011 prices of $3.53 per gallon. In 2010 retail prices for regular unleaded gasoline were $2.78 for the year. The US EIA predicts 2013 retail gasoline prices for regular unleaded to dip down to $3.33 per gallon.
These predicted gasoline prices are based on the assumption that Brent crude will average $103 per barrel for the second half of 2012, and $100 per barrel for all of 2013. These gasoline price forecasts also assume that world oil-consumption-weighted real gross domestic product (GDP), which increased by 3.0 percent in 2011, grows by 2.8 percent in 2012 and 2.9 percent in 2013.
From a gasoline pricing strategy and a fuel price management perspective, if these predictions hold true, the overall size of the retail gasoline fuel market is likely to remain steady because drastic gasoline price increases to the $4 threshold are not within sight for the next 18 months.
by John Keller | Aug 14, 2012 | Fuel Pricing Strategy, Retail Fuel Margins
Valero Corner Store extends gasoline pricing strategy to GasBuddy.
Valero Corner Stores is the second PriceAdvantage customer to extend their gasoline pricing strategy to the web via GasBuddy OpenStore. Rutter’s Farm Stores is also using GasBuddy OpenStore to publish their gasoline pricing to the Web. Corner Store and Rutter’s locations now appear on their GasBuddy browser map with their gasoline prices, easy for consumers to find.
Valero and Rutter’s recognizes that a key part of the fuel price optimization strategy is to not only push prices to the store POS, pumps and gas price signs, but to push it to the web as well. With the advent of smart phones and the plethora of gas price smart phone apps, travelers can now easily check the price of gasoline while on the go, and that means the fuel price optimization strategy must include marketing gasoline prices via virtual gas price signs on these apps.
by John Keller | Aug 13, 2012 | Fuel Pricing Strategy, Industry News
US EIA reports a $0.076 fuel price increase from last week.
In today’s Gasoline and Diesel Fuel Update, the US EIA reported regular unleaded retail fuel prices across the US increased for the 6th consecutive week, this time by $0.076 per gallon to $3.72. Fuel prices are now at levels last seen May 21, 2012. Unleaded regular fuel prices are now $0.117 per gallon higher than one year ago.
Retail gasoline prices increased everywhere tracked by the US EIA except the state of Ohio which saw a $0.126 per gallon drop, and the cities of Chicago and Cleveland which saw a $0.020 and a $0.102 per gallon drop, respectively.
The biggest fuel price increase was found in California at $0.228 per gallon, with a $0.28 increase in San Francisco and a $0.219 in Los Angeles.
From the fuel price management perspective, the Fuel Manager should use this data in their fuel price optimization software to optimize the gasoline pricing strategy in each of their markets.
by John Keller | Aug 13, 2012 | Fuel Pricing Strategy, Industry News
US EIA reports gasoline fuel consumption increases in April and May over 2011.
In the US Energy Information Administration report “Today in Energy” dated August 13, 2012, the US EIA reported gasoline consumption was up slightly in April and May this year compared to last. Bucking the trend going on for years, April 2012 showed a one month consumption increase of 55 thousand bbl/d compared to 2011. May 2012 showed a consumption increase of 200 thousand bbl/d compared to the same month previous year.
U.S. gasoline consumption peaked in 2007 at 9.3 million bbl/d and fell by an average of 3.2% (300 thousand bbl/d) in 2008 due to the recession and high gasoline prices, which topped $4 per gallon in June and July 2008. Gasoline consumption remained flat the next two years, increasing by just 0.1% in 2009 and falling slightly in 2010. In 2011 gasoline consumption fell by 2.9% (260 thousand bbl/d) from the year before.
The first three months of this year, gasoline consumption averaged 124 thousand bbl/d lower compared to last year.
From a Fuel Price Management perspective, this data is critical for comparing overall market size fluctuations vs. differences year over year, and manipulating the gasoline pricing strategy for various markets.
by John Keller | Aug 9, 2012 | Retail Fuel Margins
Susser announces retail fuel margins of $0.324 in Q2.
Susser announced in their 2012 Q2 report retail fuel margins of $0.324 per gallon, slightly above the retail fuel margins of $$0.312 in the same quarter last year. For the first six months of 2012, retail fuel margins are at $0.23, essentially unchanged from the same period last year.
Retail fuel volumes per store reached 30,800 per week, up from 28,600 from the same period last year. Susser operates approximately 545 convenience stores across Texas, Oklahoma and New Mexico under the Stripes name.
by John Keller | Aug 9, 2012 | Industry News, Retail Fuel Margins
Delek US Holdings reports retail fuel margins of $0.182 for Q2.
In their Q2 report for 2012, Delek US Holdings reported retail fuel margins of $0.182 per gallon, compared to $0.186 per gallon in 2011. For the first six months of 2012, retail fuel margins stand at $0.153 per gallon compared to $0.157 per gallon in 2011.
Retail fuel volumes per store for the quarter were up roughly 7% from 86,505 gallons to 92,662 gallons. Average retail fuel gallons per store for the period was 278,000 gallons, up from 260,000 gallons for the same period last year. That equates to approximately 92,660 gallons per store per month for the quarter across their 372 stores.
Delek US Holdings operates 372 MAPCO Express c-stores throughout the southeastern United States.
From a fuel price optimization strategy perspective, it’s interesting to compare these results with the results from The Pantry. Both chains operate c-stores in overlapping states, one can assume with similar market pressures. Yet The Pantry shows struggling results with decreased retail fuel margins and gallons sold, while Delek US Holdings shows retail fuel margins holding steady with increased fuel volumes.
by John Keller | Aug 2, 2012 | Fuel Pricing Strategy, Industry News
In the Harvard report “Oil: The Next Revolution, The unprecedented upsurge of oil production capacity and what it means for the world”, Leonardo Maugeri predicts a change in the balance of power and and a long-term lower oil prices for the remainder of the decade. From a fuel price management perspective, this is a fascinating picture of where we are today and where we are likely to be in the coming decades.
Mr. Maugeri outlines a range of different scenarios with varying economic possibilities ranging from a new world-wide economic recession, a sudden solution to major political tensions, a collapse of the China economy, and a sudden recovery of the world economy. Mr. Maugeri writes “I have no particular preference for any of these scenarios…although I think the probability of a significant fall in oil prices is higher than all other scenarios.”
The paper asserts that its most important messages are these:
- Oil is not in short supply
- The oil market is global and none of its pieces/countries can be insulated from the other
- The shale boom in the US is the most important revolution in the oil sector in decades
- Conventional oil production is growing throughout the world
- The oil market will continue to remain volatile through 2015
- The Western Hemisphere could return to pre-World War II status of self-sufficiency
