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    Volatility & Variation

    Uncertainty at the pump is increasing retailers’ interest in alternative fuels

    By Brian Berk, Convenience Store News
    Close up of a gas pump

    There is plenty of good news and bad news happening at the pump. A heavy impact from gas price volatility and an early acceptance among retailers to sell alternative fuels are the two most notable takeaways from the latest Convenience Store News Motor Fuels Study.

    Regarding gas price volatility, nearly 91 percent of respondents said their store(s) have felt some impact from changing gas prices, vs. 87 percent in 2012. More retailers cited fuel prices as having an impact on decreased traffic at their stores (40.9 percent) than ever before.

    The impact is not all negative, however. Although nearly 41 percent of retailer respondents stated that store traffic dropped — a nearly five-point year-over-year increase — the impact on sales and profitability actually decreased significantly compared to the prior year. Just 27 percent of those surveyed said sales decreased as a result of gas price volatility, vs. 42 percent during 2012. Slightly less than 39 percent of survey participants stated fuel price volatility caused a decrease in profitability, a large drop from nearly 53 percent who made such a claim in 2012.

    Higher fuel prices and improved fuel margins are most likely the cause for these mixed results. The average national price of a regular gallon of fuel was $3.62 during the first half of 2013, compared to $3.57 in the first half of 2012. Meanwhile, the average margin per gallon rose 3.3 percent to 14.6 cents per gallon.

    Gallons sold per transaction decreased by 1.4 percent overall. Nearly one-third of the retailers surveyed by CSNews reported that their gallons sold decreased in 2013. Just 17 percent said their gallons sold per transaction increased last year.

     

    ALTERNATIVES MOVE FORWARD

    Traditional petroleum — classified as E10 under the blend wall — continues to overwhelmingly be the fuel of choice sold at the nation’s gas stations. But alternative fuels are beginning to make their presence felt, and the landscape could be completely different in five years’ time.

    As expected, 100 percent of retailers surveyed said they sell E10 at the pump. In five years, though, this figure is expected to drop to 92 percent as c-store operators increasingly offer alternative fuels. Natural gas, ethanol and electric are all expected to be beneficiaries.

    Slightly more than 43 percent of retailers indicated that they currently sell an alternative fuel. This figure is expected to rise to 51 percent in just five years’ time. Nearly 8 percent of those surveyed currently sell natural gas. But that number is expected to rise fourfold to 28.2 percent in five years.

    Electric charging stations are currently located at only 2 percent of retailer respondents’ stores, but nearly 8 percent expect to have such an offering by the end of 2018, a fourfold rise.

    The number of retailers selling ethanol higher than the E10 blend wall is also expected to be on the upswing. Nearly 18 percent of respondents sell ethanol currently, with this figure expected to rise to 36 percent in five years.

    Nearly one out of every 10 retailers surveyed currently sells flex-fuels, such as E20, E30 and the most popular offering among this group: E85. More than 23 percent said they expect to offer these fuels in five years.

    As for E15, it is considered the most controversial blend within the ethanol group. Even though it was approved by the U.S. Environmental Protection Agency in 2011, some retailers have been hesitant to sell the blend of 15 percent ethanol and 85 percent gasoline due to misfueling concerns and statements by AAA and the American Petroleum Institute that the fuel — approved for use in cars 2001 and newer — can cause engine damage.

    Ethanol advocacy groups, as well as retailers already offering E15, have rejected these allegations as false. With that said, the sale of E15 at the pump will increase over the next five years, according to the CSNews Motor Fuels Study. Slightly less than 8 percent of retailer respondents indicated they currently offer E15 at the pump, but more than one-quarter of respondents (25.6 percent) plan to offer E15 in the next five years.

    In an effort to break down retailers’ feelings about E15 even further, CSNews asked respondents about their level of interest in offering E15. More than 71 percent of those surveyed said they were not very interested or not at all interested in offering E15 in the future. Nineteen percent said they were somewhat interested, while another 9.5 percent noted that they are very or extremely interested in offering E15 at the pump.

    When asked to identify the most important factor when deciding whether to offer E15, a majority (54.8 percent) cited consumer demand, followed by equipment expenses and possible liability concerns.

     

    PAYMENT AT THE PUMP

    Another change is occurring at the pump that has nothing to do with the types of fuel offered. The method of payment the customer is choosing to use is evolving.

    The biggest change is being seen in debit card payments. Nearly 16 percent of consumers paid at the pump using a debit card in 2013, vs. just over 12 percent in 2012. At first glance, one might believe this is on account of c-store operators encouraging consumers to avoid using credit cards due to the hefty interchange swipe fees they carry. However, while credit card payments declined year over year, they only did so by 0.2 percent.

    Taking the brunt of the difference was cash. Nearly half of consumers (49.4 percent) used cash at the pump in 2012, but that number dipped to 46.2 percent in 2013.

    An unwillingness to carry the cash on hand needed to pay for fill-ups could be one reason why debit card use rose at the expense of cash. Another possibility could be that consumers preferred to stay in or close to their vehicles while filling up due to colder-than-expected weather conditions in many areas of the country. Using cash requires a consumer to venture to and from the pump into the convenience store to pay. 

    By Brian Berk, Convenience Store News
    • About Brian Berk Brian Berk is managing editor of Stagnito Business Information's Convenience Store News and Convenience Store News for the Single Store Owner, where he specializes in covering motor fuels, technology and financial news. He has served the magazine industry for 14 years and has also worked in the radio and newspaper fields. Berk holds a bachelor's degree in communications from the State University of New York at Cortland and a master's degree in journalism from Quinnipiac University in Hamden, Conn.

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