FuelQuest Blog

Thoughts from WasteExpo: Managing Big Expenses in the Big Easy

Wed, 22 May 2013 10:12:39 +0000

For those in the know, the largest event in the environmental and waste/refuse sector–WasteExpo– is going on this week in New Orleans. It is by far the largest gathering of companies in this sector each year. I was fortunate enough to present to leaders in the waste industry today about one of those primary expenses that can really eat at the bottom line, fuel for the fleet.

To the layperson, fuel is not always the most exciting thing to talk about, but when you are a fleet-based company, it is typically the largest expense after head count. So, given the pure financial impact, it commands attention and scrutiny! That being said, one of the most discussed topics this year is fuel price volatility.

The volatility that we have seen in the market since 2004 continues (with no signs of stopping). When you have a daily movement of 3 cents or more happening nearly 50% of the time, something has to be done to lessen its effects. Luckily, there are ways that companies can combat these movements, given a good plan and the technology to execute it. When you manage your fuel effectively, you can use this volatility to your advantage and not be caught on the wrong side of a 10 cent price swing – which can translate to $800 for a single load.

One of the other hot topics this year is invoicing. Given recent events in the news about fuel invoices, it’s not surprising that this audience is talking about how to ensure that the invoices they are paying are correct.

To underscore this, when we bring on a new client, we review past invoices as part of our benchmarking service, and have seen invoice inaccuracies up to 25%. When you are talking about an invoice to the tune of $20,000 to $25,000, it pays to check each one thoroughly. However, if you don’t have technology to help, this can eat up a lot of hours and the tendency will be to not scrutinize them. This is definitely not something that you want to do since even a variance of 1% of the typical fuel invoice is $200-$250, and these can quickly add up.

At the heart of this issue is the fact that fuel invoicing can be a real challenge–with the types of fuels available, contracts that pricing is tied to, the index the price is based on, and changing fuel tax rates, there are many details to manage and reconcile. We have even seen examples of customers receiving invoices from suppliers that were meant for other customers. Mistakes happen, but a $25,000 mistake can really ruin your day. To put it another way, you would hate to have all of your strategic effort around managing fuel volatility and efforts to optimize usage possibly be lost due to a single invoicing error.

Looking Ahead to the Future of the Retail Fuel Industry

marketing@FuelQuest.com (Sean Evans, Marketing Communications Specialist) — Thu, 02 May 2013 10:12:39 +0000

Last week, FuelQuest held its 9th annual GRAIL conference in San Diego. Excitement was high as representatives from companies across North America travelled to the industry event. GRAIL attendees heard presentations from noted economist Dr. Philip K. Verleger of PKVerleger and Greg Scott, SVP Supply Operations, from Cumberland Gulf Group. An industry panel discussion followed which included Paul Stone, formerly of Shell International and an independent director for FuelQuest and was moderated by Matt Tormollen, FuelQuest President and CEO.

After hearing similar messages from both Verleger and Scott on the future outlook of the retail fuel market, one thing that stuck in my mind was the importance of carriers and fuel suppliers working with retailers and fleets to help each remain competitive to combat not only fuel volatility but non-traditional competitors. Although each approached it from a different angle, one thing that they both focused on was the changing market dynamics for fuel retailers and that adaptation will be necessary for retailers to survive alongside declining gasoline consumption, competition from big-box retailers and other non-traditional competitors.

Specifically, Greg Scott stressed that retailers will need to embrace alternative fuel offerings as well as revamp beverage and fresh food offerings to continue to drive customer loyalty – the “same old tired salty snacks just won’t cut it” and “fresh, good tasting food service” is a necessity.

The other side of this future state and something that retailers have been combating since 2004 is fuel volatility. Combating volatility requires both retailers and suppliers to work together and be nimble to take advantage of the opportunities that volatility presents. Companies and suppliers who support load shifting tactics with good performance and accurate billing will help retailers and fleets remain successful and become trusted partners.

Highlighting this need, the 2nd annual FuelQuest Q Awards brought it into focus this year as two of the winners led their respective categories in load shifting, with the third leading the pack in invoicing accuracy. These trusted partners delivered accurately and dependably throughout the previous year to help make FuelQuest customers successful in their respective businesses.

So congratulations to Falcon Fuels (for delivered supplier of the year), Pro Petroleum (for carrier of the year for the 2nd year in a row), and U.S. Oil and Refining (FOB rack supplier of the year)!

Wrapping up another exciting GRAIL conference, we can now look forward to next year’s event in Nashville in 2014!

How One Cup of Coffee Will Help Repave Our Roads

marketing@FuelQuest.com (Elvira Ballard, Marketing Communications Specialist) — Wed, 01 May 2013 10:12:39 +0000

FuelQuest’s 9th annual GRAIL conference has concluded, attracting hundreds of FuelQuest users, partners, customers, and industry thought leaders. Our time in San Diego was marked with a number of sessions offering a selection of in-depth, diverse, and solution-focused topics – in addition to wonderful restaurants in the nearby Gaslamp District. With multiple late night dining options nearby, coffee was in high-demand at the GRAIL conference, and it struck me when a speaker shared an anecdote relating a cup of coffee to the current gap in tax revenue caring for our nation’s infrastructure.

In his presentation at GRAIL, Rich Little, Senior Manager, with Deloitte Tax LLP indicated that consumers’ buying habits continue to erode state tax revenue as we move towards more efficient vehicles and less-expensive alternative fuels. States are scrambling to find new ways of increasing tax revenue to rebuild their coffers for upkeep of deteriorating roads. “If everyone in America gave up one cup of coffee that would repave all the roads in the country,” he stated. While this may or may not be 100% accurate, in my mind it illustrates two things:

The current gap in our tax revenue infrastructure has widened to point where it is now everyone’s problem.
The amount of sacrifice needed to overcome this gap is minimal, when distributed across all users.

The types of solutions available are many and each state has its own challenges and ideas on how to overcome their deficit. But as this industry is well aware, complex and changing fuel tax laws will continue, and savvy retailers in attendance at GRAIL have turned to automation for their tax determination and filing processes.

What are your thoughts? Feel free to share your comments below.

Business Agility – What Do You Mean?

marketing@FuelQuest.com (Rich Witmer) — Thu, 18 Apr 2013 10:12:39 +0000

Earlier this month, FuelQuest hosted a webinar to discuss the advantages of automating motor fuel excise tax determination. An attendee asked that very question, ‘What is business agility’. It got me thinking this is more than a buzzword; this was about what that concept means for an organization that has to deal with motor fuels excise taxes in multiple states or jurisdictions. What happens when that business expands and moves into a new state and finds themselves on the hook for filing and reporting with different tax rates and rules?

One thing is certain; a business must be able to react quickly. In 2012 alone the U.S. had 522 motor fuel tax law changes, a whopping increase of 30.4% from the prior year! Keeping up with and staffing for this multitude of changes is no easy feat. Companies struggle to keep pace with these constant adjustments, spending precious IT and accounting department time and resources. In addition, managing these changes is often the least of their worries. Tax related errors and the activities associated with fixing them often pull high-value resources from various departments attempting to minimize customer facing and financial impacts.

In an effort to manage this process, many companies have developed in-house tax determination solutions. These organizations often find after the fact, these ‘home-grown’ solutions didn’t meet their requirements for business agility (or the ability to make changes as needs dictate, such as adding tax information for a new state), tax transparency (the ability to easily understand the tax calculation process), and accurate tax calculations. Of course, accuracy in these tax calculations is paramount as an incorrect calculation causes all kinds of problems, including the potential for fines.

What we are finding is many organizations are now realizing that to be agile they need to move to an automated tax solution for their tax calculation process. Making this move can be confusing and difficult especially when resources have been sunk into creating the existing system. Understanding the value of an automated solution and what it would mean to the organization is tough too, but luckily there are solutions in the market that can give companies that agility and peace of mind.

The Fueling Business tax determination webinar was a success based on the feedback FuelQuest received. We thank all those that were able to participate. However, I know there are other questions out there so I encourage you if you haven’t already, to view the recorded webinar and let us know if your business is one that desires business agility. For advance notification of upcoming webinars, drop us a quick note on our Contact Us page, or follow us on Twitter, Facebook or LinkedIn.

Fuel Market Trends 2013

marketing@FuelQuest.com (David Zahn) — Fri, 21 Dec 2012 10:12:39 +0000

With more than 19 billion gallons of fuel under management from leading global oil companies, international retailers, shippers and government entities, we have a unique perspective on challenges and opportunities for the coming year. We released our top Fuel Market Trends for 2013, which outline what we expect to happen over the next 12 months. Here are some highlights from that report:

Fuel Prices Will Continue to Swing Wildly

Our analysis of the U.S. Department of Energy’s (DoE) historical price information revealed a “new normal” in fuel price volatility. Prior to 2004 fuel buyers had little to worry about in terms of day-to-day price changes – changes of over 5 cents occurred only 1.5 percent of the time. Now moves of 5 cents or more happen 25 percent of the time. Worse, price swings of 3 cents or more happen nearly 50 percent of the time versus just 6 percent pre-2004. Businesses that still operate with manual processes and spreadsheets are effectively rolling the dice every day hoping to be on the low end of the price swing. This volatility will continue into 2013 and beyond as a result of the continued increasing cost of fuel, rising global demand, continued political instability in the Middle East, reduced supply, and the impact of speculators and investors on fuel markets.

Superstorms Will Continue to Best the Retailers Superstorm

Sandy’s impact to the Northeast exposed not just the industry’s lack of contingency plans, but also its inability to quickly meet shifting demand patterns around such events. As the total number of tropical storms reaches 80 to 90 each year, businesses will need to establish protocols to assist recovery efforts before the next storm hits Retailers and distributors across the globe would be wise to learn a lesson of Sandy and pre-plan for fuel shortages, outages or lack of electricity at the pump. Aspects of a recovery plan should include communications, stand-by supply commitments and forecasting, as well as calculating the fuel needs of generators and other emergency backup systems that will be critical for operations if there is a power outage. With so much to tackle, retailers will likely not be able to do everything that’s needed in time for the next wave of storms, but they should begin to work towards these goals now.

Mergers & Acquisitions Accelerate and Put Pressure on Small Fuel Retailers

The retail landscape is shifting as M&A activity continues to shake up the fuel industry. The acquisition of regional chains will give larger retail chains a benchmark to enter new markets. Midwest chain Speedway is evaluating options on expanding into western Pennsylvania in the coming year, to compete with locally-based GetGo and Sheetz. Established Florida retailers 7-Eleven and Circle K have new competitors with the entry of two iconic U.S. regional brands, Thorntons (based in Louisville, Ky.), and Wawa (headquartered in Wawa, Pa.). The new canopies on the landscape and upscale in-store experiences will force older, existing retailers in these areas to upgrade their sites to drive in-store traffic. Competing at the pump against larger companies and their greater resources will be a concern for smaller chains in these and other areas of the country. Technology exists to obtain fuel inventory, supply costs, pricing and even margin details down to the corner store level. This granular visibility lets retail operators – regardless of their size – manage their businesses with timely and accurate data to capitalize on market price swings, driving in-store traffic and beating their competitors with smarter fuel management.

Fuel-Based Businesses Will Get Stung By Tax Compliance

With the economy churning towards a slow recovery, many states are exploring every possible way to increase tax revenues. The impacts to fuel-based businesses are many. Organizations will have to be wary of more frequent audit and increased penalties for non-compliance. Savvy companies should be thinking ahead on how to maintain compliance with changing fuel tax rates and rules. Companies dealing with bulk fuel will need to act swiftly to comply with these evolving requirements, as well as future-proof themselves to deal with additional changes in the future.

California Will Become Epicenter for Fuel Debates

California is the largest consumer of fuel in the U.S., however due to gasoline formula requirements related to air quality standards, the state can only consume fuel that is refined within its borders. This makes the state especially vulnerable to global events that affect supply since California receives nearly 50 percent of its oil from foreign imports. Without oil pipelines from nearby states, California is literally separated by time and distance to supplies from outside the state. Maintaining steady pricing is a balancing act with these unique supply factors. There is no relief in sight to fix California’s underlying structural issues, which are subject to constant debate. But perhaps this imbalance will be the impetus for the state to relax its regulations and open up additional supply options. Changes will allow retailers and distributors, at the very least, to have additional options in the event the constant balancing act fails to keep prices in check.

Challenge or Opportunity? You Decide.

Though fuel volatility is expected continue to increase and the competitive landscape will no doubt change, one thing remains certain for fuel-based businesses in 2013 – companies can view these trends as challenges or opportunities. Many leading companies are taking advantage of fuel management automation technology to accurately assess inventory levels, consumption, sourcing options, and tax and environmental compliance. By doing so, these fuel-based companies are able to compete more effectively in this changing industry.

Preparing for Storms: A Plan for Gasoline Retailers

marketing@FuelQuest.com (Greg Salverson) — Wed, 05 Dec 2012 10:12:39 +0000

Whether you live in India and call them Cyclones, Asia and call them Typhoons, or North America and call them Hurricanes; powerful tropical storms have a significant impact on downstream operations for oil and gas companies and fuel (petrol) retail dealers. In 2012, oil and gas companies struggled to provide branded quality supply during super-storms like Hurricane Sandy in the Northeast US, Typhoon Saola in the Philippines and Taiwan, and Tropical Storm Son-Tinh in Vietnam.

What can retail fuel dealers do to prepare for the annual storm season?

Prepare – Top up tanks before the storm arrives to reduce runouts (outages), improve fleet utilization by prioritizing deliveries to high volume stations after the storm and import more fuel in your depot to supply the market.
Monitor – Central dispatch should have tools to alert stations with communication problems, outdated inventory readings, or low inventory levels so they can respond to the issues.
Respond – The best plans change. Up to date information about traffic, flooding, and every station’s inventory levels and runout dates, allow central dispatch to adjust plans to manage priorities.
Control – Flooding causes many problems including equipment failure and product contamination. Wetstock analytics identify faulty equipment and water contamination, preventing costly fines.

When possible, pre-plan for fuel emergency preparedness in coordination with your supply team, depot managers or fuel supplier. Aspects of your plan should include communications, stand-by supply commitments, and forecasting downstream demand to ensure supply is available at the terminal. Remember to take into account the fuel needs of generators and other emergency backup systems that will be critical for operations if there is a power outage.

For retailers optimizing inventories, delivery schedules, or pricing by using fuel management solutions, most dashboards will offer multiple opportunities to adjust to potential supply disruptions and demand spikes. The continuous overlay of near real-time fuel information on solutions built around industry best-practices enables retailers to stay on top of any rapidly changing situation.

North America and Asia combined will have 80 to 100 named tropical storms per year with about 40 to 60 becoming a hurricane, typhoon or cyclone. Preparedness and a flexible central response plan are the keys to maintaining supply before and after the storm passes.

The New Normal

marketing@FuelQuest.com (Rich Witmer) — Wed, 17 Oct 2012 10:12:39 +0000

“Are high gas prices the ‘New Normal’? This was the question posed to the two US presidential candidates during last night’s debate. Just like office water cooler talk and Facebook chatter, the two candidates quickly escalated their differing views on this touchy subject. And no wonder, energy and fuel costs are a growing portion of Americans’ personal budgets, and people feel strongly about this issue as it directly impacts their wallets.

But no matter who is to blame, the facts remain that US fuel prices have risen in the last few years. FuelQuest recently completed an analysis of Department of Energy data, and determined that in addition to prices rising steadily, there is indeed a ‘new normal’ in daily volatility (that is the price movements within each day) for refined petroleum product commodities. Before 2004 a day-to-day move of more than 3 cents in the price of fuel was uncommon – happening around 6% of the time. But after 2004, this volatility is now happening nearly 50% of the time –impacting not only consumers at the pump but various fuel-centered businesses such as trucking companies, fuel retailers and even government fleets.

While the candidates agreed to disagree on how they would attempt to solve this issue, the crystal ball’s vision of the future remains cloudy. Nothing on the horizon seems to indicate this volatility will correct itself to pre-2004 levels – and it will remain a hot topic at the next debate and presidential election.

What are your thoughts on the gas price debate? How do you feel about the ‘New Normal’?

For more information on how to better manage your fuel or to request a white paper on this topic, please send your comments to us at http://www.fuelquest.com/contact-us. Follow our discussion on this topic on FuelQuest’s LinkedIn Group page at http://linkd.in/T0T5Ue.

NACS 2012

marketing@FuelQuest.com (Rich Witmer) — Tue, 09 Oct 2012 10:12:39 +0000

“Whoa! You gotta try this,” was heard over and again as the annual NACS/PEI tradeshow started with a bang in Las Vegas on Monday. The exclamation was made as record crowds surged through the Las Vegas Convention Center with energy drink vendors handing out free samples at seemingly every corner booth.

Perhaps artificially fueled by these energy drinks, the crowd seemed very enthusiastic and the show was indeed a busy one. It didn’t hurt that this year’s show is in Las Vegas, the entertainment capital of the world, and many international attendees could be seen among the attendees.

The enthusiasm could possibly have been the industry collectively blowing off a little steam after another tough year. Fuel retailers in particular were pinched this year as fuel prices remain high and fuel price volatility continues to increase.

Or maybe the energy on the show floor indicated a sense of optimism in this U.S. election year that things will improve for an industry that is arguably the lifeblood of the U.S. economy. Witness these facts from NACS:

Convenience stores sell approximately 80 percent of all fuel sold in the United States.
The U.S. convenience store industry alone serves nearly 160 million customers per day.
An average store selling fuel has around 1,140 customers per day, or more than 400,000 per year.

At the close of the first day of the show, I couldn’t help noting the irony of the now famous slogan “What happens in Vegas, stays in Vegas.” The energy of the tradeshow crowd (artificially induced or not) seemed to indicate attendees are optimistic about what next year will bring, but unlike the slogan, I’m sure they want to bottle this enthusiasm up and take it with them when they leave Las Vegas, to prepare for what looks like another tough year ahead.

The Convenience and Fuel Industry Conference (CFIC)

marketing@FuelQuest.com (Greg Salverson) — Thu, 13 Sep 2012 10:12:39 +0000

The Convenience and Fuel Industry Conference (CFIC) kicked off Tuesday September 11th in Melbourne, Australia with over 300 delegates in the fuels and services industry. The CFIC is designed to focus on the latest industry trends and market issues in the fuel industry. Three major issues were discussed during the conference:

1) Security of Supply. The Major Oil Companies are shedding refinery and retail assets in Australia due to high competition, heavy environmental regulations, and low profit margins. The Majors have historically guaranteed supply. As they shed assets, the distributors and retailers face developing new strategies to secure supply. This is both a threat to daily retail operations and an opportunity to reevaluate their procurement strategy.

2) Discount Programs. Hypermarket retailers are combining their economies of scale and diversity of grocery products to offer lower petrol prices using loyalty and discounting programs. Price is the #1 reason consumers stop to buy petrol. Operators must examine their branding and marketing strategies to compete on the new independent petrol pitch.

3) Tank Monitoring and Integrity Programs. Environmental Compliance in Australia is modeled after the US EPA laws and has been in place for many years. Still today, many operators are ignoring environmental compliance regulations and adding unnecessary risk to their businesses. If a site has double wall tanks and fuel lines made with modern materials then it is a low risk gamble, but if a site has steel tanks or lines then the odds of a problem occurring begin to mount.

The Australian market is facing significant changes in the years to come. These same changes have reshaped the US market over the last 10 years and have allowed independent retailers and ‘super distributors’ to gain an upper hand over smaller independents. Now is the time for Australian fuel retailers to benchmark their operations to prepare for the next generation Australian fuel market.

2012 NAG Conference, New Orleans

marketing@FuelQuest.com (Angela Wisdom) — Mon, 10 Sep 2012 10:12:39 +0000

Monday has shaped up to be a great day at the 2012 NAG Conference for two reasons. First, I was able to meet many convenience store owners and discuss the increasing pressures on the small retailer including continued fuel price volatility as well as industry consolidation. Second, on a more personal note, there was an @Oprah sighting in our hotel here in @New Orleans. It appears that she and Denzel Washington are filming a movie and like us, are staying at the Windsor Court Hotel. Way to go NAG; great venue choice! As a funny side note, we are meeting downstairs after the conference and before dinner in hopes to see some more stars! We’ll see what tomorrow brings, but regardless, we are happy to represent @FuelQuest as a sponsor of this year’s NAG (National Advisory Council) Conference.