by John Keller | Jul 18, 2011 | Fuel Price Management, Fuel Price Management Solutions, Fuel Pricing Strategy, Industry News
Walmart joined the retail fuel price loyalty game this summer, partnering with Murphy Oil to offer $.10 discounts on fuel when the purchase is made using one of the Walmart payment cards. Loyalty reward incentives are becoming mainstream across retail fuel c-stores and grocery store chains.
So the question is, how can the fuel manager compete? The answer lies in understanding the fuel pricing strategy at Murphy.
Murphy focuses their fuel price management solution around the urgency of fuel price changes. At Murphy, the fuel price strategy is a volume game. Murphy uses price as their number 1 advertising, as their billboard. Murphy advertises their price on enormous gas price signs, projecting such confidence that the consumer believes Murphy must have a low price since the sign is so bold. Murphy has reached such operational efficiencies in the fuel price change process, they can react extremely quickly to hourly wholesale price fluctuations. Murphy routinely changes fuel prices 2-3 times per day to squeak out the highest possible volume and profit hour by hour, based on these hourly wholesale price fluctuations. Speed to the street wins. When wholesale prices go up, retail price changes can happen almost immediately. When wholesale prices go down, Murphy can make it very difficult on the stores around them by dropping retail prices right away. Murphy sells such high volumes of fuel, the difference of a fraction of a penny, multiplied out times every gallon sold across their enterprise, yields huge profits.
The only way to compete against Murphy is to implement a fuel price management solution that watches Murphy prices like a hawk. Subscribe to the OPIS Radius report and get pricing feeds througout the day. Track every Murphy price move by allowing store and territory managers in the field to quickly report new Murphy prices to headquarters, or better yet, empower these managers to use their mobile device to change prices immediately when Murphy moves. Then the fuel manager can know what’s happening in the field in real time, and analyze store performance in terms of my price vs. competitor price, and gallons sold as compared to the same day of the previous four weeks. With this fuel price management solution, fuel managers can quickly make adjustments to their Murphy competitor strategy, and maintain the strategy that makes sense, whether it is matching Murphy, or staying within the price differential that the market will bear.
by John Keller | Jul 18, 2011 | Fuel Pricing Strategy, Industry News
In today’s US Energy Information Adminstration weekly fuel price report, the USEIA revealed a $.04 increase for the national average price of Unleaded Regular fuel. That’s an $.11 increase over the past two weeks. The US national average retail fuel price of unleaded gasoline now sits at $3.68/gallon, a gallon of midgrade rose to $3.79, and a gallon of premium rose to $3.93. These prices now reflect levels not seen since mid-June.
The regional area hit hardest was the Lower Atlantic, where the average price for unleaded rose $.07 to $3.72/gallon. The region with the lowest increase was the “West Coast Less California” region, where prices were unchanged from last week, remaining at $3.69.
As for individual states, Texas had the largest fuel price increase of the week, where prices rose $.08/gallon for unleaded, with an average price of $3.65/gallon.
The highest average price in the nation for Unleaded is now in New York, up $.06 reaching $3.97/gallon. In Chicago, a gallon of Unleaded is priced the highest in any major city, at $4.02 per gallon.
by John Keller | Jun 8, 2011 | Fuel Price Management Solutions, Fuel Price Optimization, Fuel Pricing Strategy
The Baltimore Sun recently published this letter to the editor from an owner of a convenience store. It’s interesting to hear the fuel pricing problems this local retailer is dealing with, as people report that his fuel prices are 10 cents higher than the competition.
“I am one of the owners of Ray Adolph’s Citgo on York Road in Lutherville. Earlier this week, our station was mentioned in an editorial (“A dime’s worth of difference,” May 23) for having gasoline prices more than 10 cents higher than neighboring stations. While that was accurate, I would like to enlighten the general public as to what occurred that week.”
“On May 9, our station was posting a competitive price for fuel. But looking ahead, I saw on my supplier’s web site that the cost of fuel was going to be 10 cents per gallon higher on Tuesday and 20 cents by Wednesday. Guess when we needed to purchase a load of fuel? Bingo. Mid-day Wednesday was when the “liquid gold” was dropped in to my tanks, and that was 20 cents per gallon higher then my previous purchase.”
“I had not only purchased the gas at the highest price for the week, but I found out later it was the peak price for the day. By 6 p.m. Wednesday, May 11, the price had already dropped 6 cents. By Friday, it had dropped an additional 7 cents, or 13 cents in all since I bought gas. I called my salesman and he made a 10-cent adjustment on what I had just purchased. However, at the time of this writing (May 26), the cost has dropped 35 cents per gallon since I purchased it. Even with the 10-cent credit, I am still the highest price in the neighborhood.”
“Our Citgo not only sells fuel but has nine service bays for general auto repairs. Consumers assume that since our gas price is so high that we will be gouging people for service work. One has no bearing on the other. Up until this recent roller coaster ride in fuel pricing, we would be as competitive as we could with selling a gallon of gas. Our service prices are very competitive.”Brian K. Adolph, Lutherville
The writer is president of Ray Adolph’s Citgo.
See the link below to read the article on the Baltimore Sun site:
http://www.baltimoresun.com/news/opinion/bs-ed-citgo-20110527,0,3108800.story
As I speak with Fuel Managers across the country, they tell me pricing fuel didn’t use to be as hard as it is today. In the 1970’s it was common to have the same fuel cost for an entire month. In the early 1980’s, there would be a new fuel cost every day, but prices never changed more than a few cents day to day. These days Fuel Price Management includes handling wholesale fuel cost swings of $.20-$.30 down one day, followed by $.20-$.30 up the next.
Blame it on fuel commodity speculators if you want, but fact is, the dramatic fluctuation of fuel costs coupled with the high consumer scrutiny of retail fuel prices has made Fuel Price Management more difficult than ever. The answer is to implement fuel price management solutions that allow for rapid monitoring of cost changes, tracking competitor retail price responses, and accelerating speed to the street to enforce the right price to the right store at the right time.
by John Keller | May 25, 2011 | Fuel Price Management, Fuel Price Optimization, Fuel Pricing Strategy
The fuel price speculative bubble is over, and the market is correcting now, according to Stephen Schork, president of Pennsylvania-based energy consultant The Schork Group Inc.
Bloomberg Business Week today reported that pump prices were $1.66 a gallon over crude oil futures in New York on May 6, the largest premium since September 2008, according to data compiled by Bloomberg. That compares with an average of 95 cents in the past five years. In 2008, it took two months for the gap to return to average.
The $4 per gallon U.S. gas prices are deterring motorists from driving, causing a 2% decrease in demand compared to last year, and likely a lower fuel prices by July. While gasoline prices may not be down by Memorial Day on May 30, history suggests they will be lower by July 4, when 32 million typically take to the roads for the Independence Day holiday.
From a Fuel Price Management perspective, that means volumes may be lower in May, but are likely to increase just as wholesale costs decrease, along with retail fuel price averages.
Read the complete Bloomberg article here.
by John Keller | May 24, 2011 | Industry News
The American Petroleum Institute reported that in April 2011, total demand for distillate fuel rose 15 percent to 4.27 million barrels a day, while consumption of ultra-low sulfur diesel fuel increased 26 percent to average 3.42 million barrels a day.
Gasoline pump prices rose 6.6 percent last month, which slowed demand 2.2 percent to 8.91 million barrels a day from the same month last year.
Fuel demand increased in April as economic growth fueled diesel consumption by truckers, Bloomberg reports.
This article was reported by NACSOnline here.
by John Keller | May 20, 2011 | Fuel Price Management, Fuel Price Optimization
The American Petroleum Institute issued a monthly report today. Gasoline deliveries, a measure of gasoline demand, dropped by 2.2 percent compared with last year. Deliveries totaled 8.9 million barrels per day.
Rising retail gasoline prices seem to have crimped consumer demand for motor gasoline in April. Gasoline prices were up by 6.6 percent in April from March, a gain of 24 cents per gallon.
Gasoline production fell for the first time in 2011, down 3.1 percent to 8.8 million barrels per day. This level was still the second highest for gasoline for any April in the past 10 years and the highest on a year-to-date basis.
As Fuel Price Management reviews their fuel volume sales and market share for April 2011, they must keep in mind the potential for an overall decrease in total volume sales for each of their markets.
by John Keller | May 17, 2011 | Customer News, Fuel Price Management, Fuel Pricing Technology
A computer glitch was to blame for a Valero convenience store selling premium fuel at $1.10 a gallon over a four hour period on May 15. The owner reported that was over $3 a gallon less than the proper price, and cost him $21,000. Roughly 7000 gallons of premium fuel were sold at that price, and police had to be called in to control the long line of traffic.
According to the Los Angeles c-store owner, the fuel price change didn’t work properly, causing the POS system to set the price to the default of $1.10 per gallon. The attendant on duty at the time was too busy staffing the convenience store and Point Of Sale system to notice the problem.
From a Fuel Price Management lesson-learned perspective, this story highlights the risk of fuel price changes going awry. Without the proper Fuel Pricing Software solution, including the critical Fuel Price Management phases of Change and Confirm, every c-store is at risk of losses like this.
The source of this article may be found here.
by John Keller | May 16, 2011 | Industry News
According to an article on MarketWatch, several companies reported retail fuel sales in April were as much as 4% lower than in March. The article specifically mentions Marathon Oil Corp., Tesoro Corp., and Delek US Holdings, Inc.
High fuel prices were to blame for the drop in fuel volume, according to the company statements. Read the entire article here.
In this shrinking fuel market environment, Fuel Managers must fight for volume market share by investing in fuel price management solutions that allow for constant monitoring of competitor pricing, fuel replacement cost, optimization strategies, volume history vs. target, and price change processes.
by John Keller | May 13, 2011 | Fuel Price Management, Fuel Price Optimization, Fuel Pricing Strategy, Industry News, Retail Fuel Margins
There’s a great MSNBC news article out today discussing the role of the US Federal Government in helping fuel prices trend downward. The key takeaway for the Fuel Price Manager is that fuel prices are going to continue their downward trend of recent days. From a Fuel Price Management perspective, that means it’s a critical moment to invest in fuel pricing solutions that allow the continued monitoring of wholesale costs, and the competitor fuel price reaction. As cost drops, now is the time to increase retail fuel profits, while carefully managing the gradual fuel price decreases that the consumer expects.
News agencies are making it common public knowledge that retail fuel prices are quick to rise when wholesale costs increase, and slow to drop when wholesale costs decrease. But these agencies are setting customer expectations for retail fuel prices to drop over the coming months. That means people will be looking for price decreases, and will be quick to jump on them with a fill-up when they see a well-advertised price.
Here are highlights from the article:
- Oil prices have peaked and appear to be coming down.
- After flooding the financial system with cash for more than two years in an effort to stabilize financial markets and economy, the Fed is getting ready to turn off the taps. The anticipation is one reason oil prices are coming back down.
- For all of the complex forces acting on the global oil market, the dollar has a powerful sway for the very simple reason that oil is priced in dollars. The dollar has begun showing signs of strength. Just as a weaker dollar helped send oil prices surging, a stronger dollar is reining them in.
- The forces that drove prices higher seem to have reversed course. Global growth seems to be slowing. The dollar is strengthening. And the inflation threat from the Fed’s easy-money policies may be easing.
- Until the outlook for oil prices becomes clearer, expect more daily price swings that will send even the most seasoned traders looking for cover.
The full article may be found here.
by John Keller | Apr 12, 2011 | Fuel Price Management, Fuel Pricing Strategy, Industry News
In today’s US Energy Information Adminstration weekly fuel price report, the USEIA revealed an $.11 increase for the national average price of Unleaded Regular fuel. The US national average retail fuel price of unleaded gasoline now sits at $3.79/gallon, a gallon of midgrade rose to $3.90, and a gallon of premium rose to $4.02. That’s the first time the national average for premium fuel has been priced above $4 for years. These are the highest fuel price levels since September 2008.
The regional areas hit hardest were the Gulf Coast and the Midwest, where the average price for unleaded rose $.12 to $3.66 and $3.90/gallon respectively. The lowest increase of any region was $.07 in the Rocky Mountains, where a gallon of unleaded fuel averages $3.57.
As for individual states, Minnesota had the largest fuel price increase of the week, where prices rose $.23/gallon for unleaded, with an average price of $3.82/gallon.
The average price of Unleaded in California remained the highest in the nation, reaching $4.20/gallon. In Los Angeles and San Francisco, a gallon of Unleaded is priced the highest in any major city, at $4.23 and $4.22 per gallon.
