Dear PEI Member:
Suppose the economy has fallen into a recession, as so many people on and off
Wall Street think. If we are in a recession, what will the effect be on the
petroleum equipment industry? We posed that question to 20 PEI distributors
over the past two weeks. Here's what we learned.
Almost 30 percent of them think our industry is as close to
recession-proof as you can get. On the retail side, gasoline margins are
more important to our customers than to the general economy. It's difficult to
imagine motorists cutting back on their driving until the price of fuel
reaches the $4 level. Existing regulatory compliance programs will
continue without regard to economic conditions. Fortunately, most customers
should be able to absorb the additional costs, with the exception, perhaps,
of the very small retail customer.
Government and commercial endeavors still have access to money that funds
refueling projects. Construction projects might be cut back a little, but
service will stay strong since marketers have to continue to attract
customers to their stores. Expect the sale of new equipment to decline some,
but look for the sale of service parts that keep the older equipment working,
total sales on par with previous years.
As the economy slows and perhaps slides deeper into a recession that may
be already underway, members view this as an ideal time to cut
underperforming employees. They also expect the employees who stay to be
grateful they have a job and less likely to hop from one job to another, or
to demand large pay increases. The caliber of job applicants should improve—especially
in the construction area—as workers
displaced from the housing industry look for employment.
As customers feel the economic pinch, demand for better pricing from PEI
distributors and manufacturers may increase. If PEI members' margins drop,
competitors on the edge could suffer. A prolonged recession might cause them
to drop out of the industry altogether, or become an attractive candidate
for acquisition by a better financed distributor.
We don't want you to get the idea that all distributor members think we
are a recession-proof industry. About two-thirds of those interviewed believe we will
be affected in some way and that a recession would cause problems that would
somehow impact the majority of our members. Accounts receivable are already
inching up. The commercial, non-retail side has a lot of work on the books
but may be cut back if the recession is long and deep. And
customers and PEI members—might
be tougher to find for less creditworthy companies. They are quick to point
out, however, that banks and other lending institutions often offer better
deals to their good, rock-solid customers during times of trouble.
We also talked to a few manufacturers over the past two weeks about this
issue. They tended to be a bit more pessimistic than the distributors,
especially if they make products that are not service-related or driven by
regulation. They voiced some of the same concerns (accounts receivable,
available financing) and reasons for optimism (a more stable workforce and
better-than-average job applicants) as the distributors. Almost all
manufacturers mentioned the weak dollar and an increasing reliance on
exports as a viable strategy to offset any decline in domestic sales.
What Does A Recession Mean to Our Industry?
Petroleum Equipment Directory
Don't miss the 2008 Purchasing & Inventory Managers Conference
May 16-17, 2008
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2008 PEI DIRECTORY UPDATE
The 2008 PEI Directory did not contain a complete list of manufacturers
represented by members in the Distributor and Affiliate Divisions of PEI.
The rest of the information in the Directory is correct (i.e., company name,
address, contact information, operations paragraph). Because the
Directory is critical to our members' day-to-day business, we have made the
necessary corrections and are currently reprinting it. The revised Directory
will be mailed to you within the next few weeks. The
online version of the
Directory has an accurate and complete listing of all product lines. We
regret any inconvenience this created.
PURCHASING & INVENTORY CONFERENCE
PEI's Purchasing & Inventory Managers Conference has been scheduled for
May 16-17 at the Wyndham O'Hare, Chicago, IL. The conference is designed for
Distributor, Service & Construction, and Affiliate division members.
The conference will feature two days of roundtable discussions and general
session topics. Prior to April 11, the cost to register is $295 for PEI
members. After April 11, fees increase to $395 for PEI members. Deadline to
register is May 2. Registration can be completed online at
Conference registration does not include overnight accommodations. PEI has
secured a room rate of $139 single/double at they Wyndham O'Hare.
Reservations must be made prior to April 15 to secure this special rate.
Complimentary transportation to and from the hotel is provided to the hotel
from O’Hare International Airport via the hotel shuttle bus.
To reserve your room, call 847-297-1234 and indicate the PEI ROOM BLOCK.
While conference registration is not open to Manufacturer members or to
Manufacturer Reps, limited sponsorships are available to these groups.
Please contact Tena Wooldridge at
for more information.
Federal Air Quality. The Environmental Protection Agency (EPA)
has issued new rules aimed at improving air quality. The new standard limits
the allowable amount of smog-forming ozone to 0.075 parts per million (ppm),
down from the previous limit of 0.080 ppm. The Petroleum Marketers
Association of America (PMAA) reports that the new standard "is an
enormous concern to petroleum marketers" who see the change as likely
expanding the use of reformulated gasoline (RFG). The Society of Independent
Gasoline Marketers of America (SIGMA) suggests that the new
standard "could throw more counties into nonattainment, and increase
pollution-control requirements for those counties."
California. The California Air Resources Board (CARB) has issued a
letter to each of the California air pollution control officials throughout
the state, encouraging them to revise their motor fuel vapor recovery rules
and eliminate the requirement for Stage II vapor recovery equipment with
pumps dispensing E85.
Oregon. The Oregon Environmental Quality Commission has adopted a
revised rule that increases the annual compliance fee for underground tanks
and the penalties for storage tank violations. The maximum penalty per
violation discovered through field inspections will increase from $100 to
$500, and the total penalty per facility will increase from $300 to $1,500.
The rule also requires operating facilities to renew valid operation
certificates annually, and to show proof of pollution liability insurance.
PETROLEUM MARKETING BRIEFS
Argentine business conglomerate Grupo Eurnekain has made an offer to buy
Exxon Mobil's Latin American assets in association with Brazilian investment
group GP Investimentos, Argentine newspaper Clarin reported last
month. Grupo Eurnekain's offer was for Exxon affiliate Esso's assets in Argentina,
Brazil, Chile and Uruguay. Esso has 500 service stations in Argentina and
240 stations in Chile, while holding 7 percent of the fuel market in Brazil.
BP announced March 3 it has put 146 retail sites up for sale throughout the Columbus,
Cleveland and Pittsburgh metropolitan areas. Most of the sites
will be sold to franchisees. Some will be sold to dealers and large
Motiva Enterprises said March 3 it has sold 51 of its Shell-branded
retail stations in the New Orleans area to Louisiana-based Lavigne Baker.
The stations will continue to operate under the Shell brand. Lavigne Baker
is jointly owned by Slidell Oil Company and Lavigne Oil Company, both Shell
wholesalers with 43 stations in Louisiana.
Shell Oil Products US has transferred ownership or supply of 84
branded sites in Oregon to PacWest Energy LLC, a joint venture formed
between Shell and Jackson Food Stores Inc.
CHS Inc. has signed a purchase agreement to acquire 33 Zip Trip
convenience stores in eastern Washington and northern Idaho. The majority of
the stores are located in the Spokane area. They will be re-branded Cenex.
"The use of hydrogen fuel in road transport is a realistic alternative
to fossil fuels and could cut oil consumption by 40% in 2050," a European
Union report says. However, a switchover would be lengthy and expensive, the
report added. The study, the result of research funded by the EU, estimates
that there will be 16 million hydrogen cars by 2030, requiring
infrastructure investment of $89 billion, Dow Jones Newswires reports.
Daily, February 26, 2008.
Top executives of BP and General Motors said March 4 that hydrogen
will likely fuel the cars of the future, although it could take 50 years to
March 5, 2008.
"An ethanol flood is nearing. By next year, a slew of new plants will
lift annual output to about 13 billion gallons. That's more than can be used
as E85 in flexfuel vehicles on the road and as E10, the 10% ethanol-gasoline
blend approved by EPA for conventional engines. Prices will plunge further,
and profits will disappear for makers. Expect the feds to face pressure to
speed up market development, building infrastructure and helping get ethanol
into more of the country and/or letting blends with over 10% ethanol in them
be used in all cars."
Kiplinger Letter, February 15, 2008.
Western Pump, Inc., San Diego, California, has been awarded second place
in the small company-size (50 to 99 employees) category of California's
Best Places to Work program. The program was sponsored by Employers
Bottom Line of MN Inc., Osakis, Minnesota, has employed Maria
Isabel Betancur to represent domestic and international Spanish-speaking
accounts. Her direct telephone number is (320) 589-5333. She formerly worked
for an exporter of petroleum pumps.
Kansas distributor. Heartland Marketing & Associates, Inc., P. O. Box
543, Phillipsburg, Kansas 67661, has applied for distributor division
membership. Lynn L. Wallgren is president of the firm, which was established
in 1990. Heartland represents Cim-Tek, Flex-Ing, GPI, HuskyCorp, Krueger,
Morrison, Natl-Spncr and Tuthill. Sponsored for PEI membership by Tom Ingram, Flex-Ing,
California engineering and architectural firm. LHB & Associates, Ltd.,
586 Higuera Street, Suite 200, San Luis Obispo, California 93401, has
applied for affiliate division membership. Jeffrey Lee is president of the
firm, which was established in 2006. The company provides engineering and
architectural services including preliminary design, entitlement processing
and construction document preparation. Sponsored for PEI membership
by Christopher G. Fasse, B&TSSCon, Nipomo, CA.
Ohio installation and removal firm. Empaco Equipment Corporation, P. O.
Box 535, Richfield, Ohio 44286, has applied for service and construction
division membership in PEI. Mark Pawuk is president of the firm, which was
established in 1980. Empaco Equipment Corporation offers environmental
remediation, emergency spill response, turnkey site preparation, and the
installation and removal of underground fuel dispensing systems. Sponsored
for PEI membership by Emil Pawuk, EmilPawuk, Richfield, OH.
- Augusta Petroleum Equipment Services, Augusta, GA (dis)
- The Tokheim Company, Marion, IA (mfr)
- MP Pumps, Inc., Frazer, MI (mfr)
- CT Earle Corporation, Gibsonton, FL (S&C)