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.