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Understanding the Retail Petroleum Marketplace: Key Insights and Trends

The Retail Petroleum Marketplace is a complex landscape where 120,950 retailers in the U.S. sell fuel, with c-stores dominating at 80%. Retailers face challenges in determining prices, influenced by competition, consumer behavior, and crude oil costs. A significant portion of consumers (63%) shop for fuel by price, and slight price changes can affect buying decisions. Retailers often operate on slim margins, striving for balance between fuel sales and in-store performance. Understanding these dynamics is critical for success in fuel retailing.

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Understanding the Retail Petroleum Marketplace: Key Insights and Trends

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  1. The Retail Petroleum Marketplace

  2. Retail Fuels Market: Agenda • Who sells fuel in America? • How do retailers determine price? • What influences fuel prices? • How profitable is fuel retailing?

  3. Who sells fuel in america?

  4. Convenience Industry • 148,126 stores in the U.S. • 120,950 sell fuels • 58% are one-store companies • Less than 1% owned and operated by integrated oil companies • 80% of U.S. fuels sold through c-stores

  5. A Small Business Industry

  6. Independence is Dominant

  7. How do retailers determine price?

  8. Retailers’ Conundrum

  9. Fuels Drive Sales, Not Profit

  10. Consumers Shop Around • 2011-2012 Consumer Survey: • 63% shop for fuel by price • 66% shop for price by observing prices at the store and while driving • 52% of consumers will change their shopping behavior for 3 cents per gallon

  11. Consumer Loyalty is Fickle

  12. How Do Retailers Set Price? • Evaluate competitive market conditions • Review historic performance associated with competitive price deltas • Might utilize price optimization software • Direct correlation between gallons sold and in-store sales • Consider cost of goods sold and breakeven • What margins are available? • What is the balance between in-store sales lift and fuel margins?

  13. What influences fuel prices?

  14. Prices Follow Seasonal Trends

  15. Demand Drives Seasonality

  16. Crude Oil Drives Retail Prices

  17. Crude Drives Wholesale

  18. Retail Follows Wholesale

  19. How profitable is fuel retailing?

  20. Retail Margin Volatility

  21. Slim Average Mark-Up

  22. Conclusion • Retailers set price based upon: • Competition for price sensitive customer • Customers shop at 45 mph and will leave for pennies • Store-wide breakeven calculation • Typically make pennies per gallon • Cost of Goods Sold: • Changes frequently – several times per day • Does not affect all retailers equally or at same time • Crude oil price is dominant factor in retail price

  23. John Eichberger Vice President, Government Relations jeichberger@nacsonline.com (703) 518-4247

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