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.
by John Keller | Mar 6, 2012 | Fuel Price Management, Fuel Price Management Solutions
The Governor of Massachusetts has directed state inspectors to intensify searches for fuel price gouging, according to the Boston Globe. Barbara Anthony, the Massachusetts undersecretary of consumer affairs and business regulation, said the state wants to make sure “no one’s even thinking about price-gouging.” Ms. Anthony has assigned more inspectors to audit gas stations.
The inspectors will also check for fuel price discrepancies between sign and pump, where signs are advertising a lower price.
From a fuel price management perspective, it’s critical for Massachusetts c-stores to make sure fuel price changes go through properly, pricing the sign in line with the pump, sign first when prices go up, pump first when prices go down. The PriceAdvantage fuel pricing software solution maintains the correct sequence for fuel price increases and decreases, in order to maintain legal pricing. The PriceAdvantage solution also provides a complete audit trail of retail store and competitor fuel prices, cost, and margin (both actual and replacement), on a daily basis. This makes it quick to respond to auditors who make accusations of fuel price gouging.
by John Keller | Mar 6, 2012 | Fuel Pricing Strategy, Retail Fuel Margins
The US Energy Information Administration reported their Short-Term Energy Outlook report today, and the administration expects regular‐grade retail fuel prices to average $3.79 per gallon in 2012 and $3.72 per gallon in 2013, compared with $3.53 per gallon in 2011. During the April through September summer driving season this year, prices are forecast to average about $3.92 per gallon with a peak monthly average price of $3.96 per gallon in May.
The value of futures and options contracts imply a 2 percent probability there will be a monthly average regular-grade fuel retail price of approximately $5.00 per gallon.
From a fuel price management perspective, if history repeats itself, these fuel price averages will have a high impact on fuel volumes, causing a significant decline in fuel volumes in 2012 and 2013.
by John Keller | Mar 6, 2012 | Fuel Price Management, Retail Fuel Margins
NACS held a media briefing on gas prices and one of the highlights was their report on the average retail fuel mark-up thus far in 2012. For the past six years going back to 2006, the retail fuel mark-up as a percent of price was between 5.1% and 6.0%. So far in 2012, the retail fuel mark-up has been only 3.8%.
It’s a well known industry fact that as retail fuel prices increase, c-stores suffer from low retail fuel margins. The long suffering fuel price increases so far in 2012 have been rough on retail fuel margins across the US. Couple the low margins with the continued trend of lowering fuel volumes, and certainly the c-store retail fuel business is not for the faint of heart.
As the retail fuel business continues to be more and more competitive, expect to see continued consolidation, where those who have invested in fuel price management systems are the only ones who are able to survive.
by John Keller | Mar 5, 2012 | Fuel Price Management Solutions, Fuel Price Optimization
In the US Energy Information Administration “Today’s Gasoline Prices” report released today, unleaded fuel prices in the Rocky Mountain region rose $0.14 per gallon, the highest of any region in the country. In two weeks, that’s a $0.24 per gallon increase in fuel prices for the Rocky Mountains.
The next highest fuel price increase for the week was $0.12 per gallon in the Midwest. Third highest increase was $0.08 per gallon in the “West Coast less CA” region. Overall, the US average unleaded fuel price increased $0.07 to $3.793.
by John Keller | Mar 1, 2012 | Uncategorized
High’s of Baltimore has been a loyal PriceAdvantage customer for several years, controlling their fuel price management process from headquarters and successfully providing a closed loop process for their retail fuel pricing business. Ben Jatlow was the original champion of the initiative and has been rewarded for his vision.
Ben will be the Vice President of Retail Operations for the company who just acquired the High’s of Baltimore c-store chain, The Carroll Independent Fuel Company.
The Carroll Independent Fuel Company selected High’s of Baltimore as their entrance into the company-operated retail fuel market. The Carroll Independent Fuel Company has grown to become one of the largest petroleum marketing companies in the US, distributing fuels to retail and commercial customers throughout the mid-Atlantic region. In the announcement of the acquisition, Carroll’s announced plans to grow the High’s brand throughout the mid-Atlantic.
We in the PriceAdvantage division of Skyline Products are proud to have High’s of Baltimore in our customer family, and we look forward to being a part of the bright future at High’s.
by John Keller | Mar 1, 2012 | Retail Fuel Margins
Kroger reported in their financial report retail fuel margins of $0.124 per gallon for the fourth quarter compared to $0.102 per gallon for the previous year. For the entire fiscal year, retail fuel margins were $0.139 per gallon compared to $0.122 for the previous year.
Fuel volumes grew at the same pace as the previous year.
by John Keller | Feb 29, 2012 | Retail Fuel Margins
Western Refining, operators of GIANT, Mustang, Sundial, and Howdy’s c-stores, announced retail fuel margins were $.15 for the latest quarter, compared to $.17 for the same quarter previous year.
Retail fuel volumes were 70.296 million gallons for the quarter, up from 51.472 million gallons for the same quarter previous year. Number of c-stores was 209. That’s up from 150 for the same quarter previous year, 37 of which were added the last quarter.
On a monthly fuel volume per store basis, Western sold 112,114 gallons of fuel at each store on average.
