Gasoline Marketing 101: Dealing with Market Fluctuation

I’m often asked why the price of fuel is rising or falling. Sometimes it’s by a friend, and other times the media gives me a call. From experience, I wonder if we are seeking something sensational or if we want a fact-based answer…


One fact that has remained constant in my twenty-five years of marketing transportation fuels is this: As supply/demand dynamics shift, so does the price of the product. This is a constant, and the free enterprise system is well at work in the marketing and distribution of transportation fuels. Notice I didn’t say “in petroleum marketing.” CarterEnergy has sold gasoline and diesel fuel since our inception in 1960, but we have sold ethanol blended gasoline for twenty-three years and bio-diesel fuel for eight. We are a “product agnostic” company. First and foremost, we are a marketing company, which means we are here to “hear” our customers’ needs and to meet them—period. We will provide the right products and services for the times!


Ethanol, just like gasoline, is a commodity and its major feedstock—corn—is a commodity as well. Corn is like Crude Oil; it trades on the open market based on supply/demand fundamentals. Our industry would be a lot easier if Corn/Ethanol prices went up and down in perfect correlation and if Crude Oil/Gasoline went up and down in perfect correlation, too. They do not! In a free market system, each of these products must sell for a “market price” and, as is true in our great country, stiff competition sets the price. This means if you have the guts to be in the business of marketing a commodity, you had better be prepared to do it efficiently (which equates to a low cost). We have built our company on this premise from day one.


Being an integrated Oil Company looked really fun when crude oil was trading at $145 a barrel and gasoline was retailing at $4.00 a gallon. Producing corn was a blast at $7.625 a bushel and when ethanol hit $2.295 per gallon, everyone wanted to own an ethanol plant. Today, Wall Street will be punishing those who own refineries because they can’t make any money producing gasoline and the largest manufacturers of ethanol are in bankruptcy. Farmers are in trouble because they had contracts to sell their corn and now the buyers are washed up. This demonstrates how quickly the complexity and volatility of our markets can take strong businesses to their knees.


While we may dislike the many factors that have impacted the price of these commodities (i.e. hedge funds taking large positions on paper) and artificially driven these prices to all time highs, CarterEnergy remains in the industry dealing with the highs and the lows. The Transportation Fuels market may seem interesting and mysterious to those who don’t work in the industry; what it really offers to those of us who do is “complexity and new complications.”


In order to remain competitive in today’s market place, this is CarterEnergy’s challenge: To offer the right products at competitive prices to our valued customers and to do it efficiently so we will be here tomorrow to see if it’s going “up or down.


A Little "Something Special"

Last Saturday morning, I was tasked with dropping my husband off at the airport to catch an early flight out of town. The night before, my sister and her children had arrived for a weekend visit. Having spent all of my time cleaning and doing laundry in anticipation of these events, I realized that I had neglected to stop by the grocery store to pick up items for breakfast.

There aren’t a lot of grocery stores near my home, so as I was driving along the interstate considering my options, an illuminated sign in the distance caught my attention. The sign for this well-known c-store chain immediately brought to mind the thought of fresh, delicious doughnuts.

I decided to stop and was not disappointed. Not only was the doughnut case full, a covered cart was waiting nearby to fill each empty spot. In addition to the doughnuts, I picked up some ripe bananas to add a bit of nutrition to our breakfast. Satisfied, I paid for my purchase and drove home.

What does this story mean to retailers out there?

What I want to pass on to you is this: when you create awareness with your customers on your offerings, they will think of you—and visit your location more often. In this case, I instantly equated this chain with fresh doughnuts, based on past shopping experiences, as well as advertising. It was that mental association that prompted me to visit their location that day to solve my problem.

You, too, can create this same awareness with your own customers. Find ways to meet their needs by keeping your store top of mind. Once you identify those unique offerings, PROMOTE THEM! Only through reinforcing your message will you ingrain it into your customers’ minds and influence their future shopping decisions.

What is your “special something?” Maybe it’s an in-store offering, such as food and beverage, or perhaps it’s an associate with superb customer service skills, or even an exceptionally clean bathroom (see Deborah’s blog). Whatever that SOMETHING is, point it out and talk it up to your customers. Make it memorable—it may be that one special something that immediately comes to mind when your customer needs a solution to a problem.


Do You Idle?

As a Commercial Fuels Account Manager at CarterEnergy Corporation, I continuously hear the same comments from our customers and prospects: “We are trying to cut costs this year” or “We are trying to save money,” and the list goes on.

We all know the state of the economy is less than ideal. But that is NOT an excuse to hang your head and give up! Now is the time to turn over every rock, explore every possibility, and look at all options to save money! What are you doing to save your company money? What have you taken to your boss lately that can show him or her how to cut costs? If you answer is… well…nothing…then we need to talk!

One of the things we constantly strive to do here at CarterEnergy is to figure out how to keep our customers healthy, in order to keep our company healthy. So we looked at our CarterEnergy fleet of fuel trucks and thought, “What can we do to save money on fuel for our fleet?” After plugging some numbers and analyzing our fleet, we came up with an idling calculator that showed us how much money we were LOSING when our trucks stayed in idle for extended periods of time. Yes Idling! Who knew? Super excited with our new discovery, we thought, “If this saved CarterEnergy money on our fleet, I bet it could save our customers money too!” and alas, the “Idling Calculator” was born.

We’ve passed this on to a few or our customers and the cost savings was mind boggling. It’s completely changed the way some of these customers operate their fleet.

Want to learn more? Contact your account manager or request information now!


Gasoline Marketing at its Finest Hour

For those of us who work in the fuel marketing segment of the oil industry, we have been living with the perception that fuel marketers and retailers are enjoying some grand benefit from the higher prices of oil. I know I get “assaulted” with this perception in virtually every conversation I have with friends, acquaintances and other business people.


Gasoline-the number one consumer item in America—is a “grudge purchase” at best. In the documentary film The Prize, the author denotes that we American’s are in love with the automobile, yet we have complete disdain for the product that propels it down the road…and, we are the most mobile society on earth!


Gasoline Marketing 101:


How is the retail price of gasoline set? Basically, by the “lowest common denominator”. On any given street in the U.S. there are typically several retail businesses where one can buy gasoline. Whichever retailer attempts to sell their gasoline the cheapest is the one who sets the price. Competition is forced to match the lowest price, for studies have shown that there is very little loyalty from consumers; they will go down the street, or further, for as little as 1 cent per gallon. On a typical fill up, this saves them about 15 cents to 30 cents.


The wholesale price of gasoline is set essentially in the same manner, but with some nuances only companies engaged in the industry would ever take enough interest in to understand. The most prolific driving factor in wholesale gasoline pricing is the “cash commodities market”. Each second the New York Mercantile Exchange is open, gasoline futures contracts change in value. The closing value each day drives pricing and is used by gasoline refiners and traders to set the wholesale price for gasoline marketers.


Competition in the gasoline industry has never been more intense. There are over 6,000 independent wholesale and retail oil companies in the United States. These companies sell the majority of the product directly to those who consume the product, whether at retail outlets or in bulk commercial deliveries.


The best measure of return in any business today is “Return on Capital Employed”. This metric tells a business whether or not they are controlling their costs and have the real ability to be competitive. What is so elusive to the American gasoline consumer is the assumption that the oil industry works like most other businesses, meaning you earn a percentage of profit on each dollar of goods sold. The gasoline marketing industry doesn’t work that way. In a good year in the Mid-Continent portion of the U.S, the profit margin opportunity on a gallon of gasoline is about 10 cents per gallon. This held true when gasoline was $1 per gallon and it holds true at $4 per gallon. One doesn’t have to be a mathematician to see what has happened to the “Return on Capital Employed” for those of us competing in this industry.


You can see that for those of us working in gasoline marketing, we had a much better profit opportunity (and a much lower risk liability) at $1 per gallon. I can assure you that we all hope the supply and demand balance will drive prices back down to a level where our opportunity is better.


Life in America is all about opportunity and, while sometimes difficult, we at CarterEnergy are thankful for the opportunity to live in this great Country and to be a part of commerce.


If you are a gasoline consumer, I hope this has helped you understand some of the complexities of the oil industry.


If you are a CarterEnergy customer, we thank you immensely for the opportunity to serve you!


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