March 6, 2012 | Vol. 62, No. 06
|Dear PEI Member:
We had the unique opportunity to meet with more than 200 members and their customers in February at various industry meetings, including annual conventions sponsored by the Western Petroleum Marketers Association (WPMA), Petroleum and Convenience-Store Exposition of Mid-America (PACE) and the Southeast Petro-Food Marketing Expo (SE Petro). Based on what they told us, here's our take on the prospects for the rest of the year―and a little beyond.
Members and their retail customers are more bullish on the prospects for the industry than at any time since the recession began in late 2007. In fact, only one member―a distributor in the Southeast―even mentioned the word "recession" in conversation. We were surprised to find out that 2011 was the best year in a decade for a few manufacturers. More than a handful of distributors, rep firms and service contractors also mentioned that they climbed out of the economic doldrums last year and posted excellent sales and profit numbers. Over half of the manufacturers we met with have added to and/or bolstered their product offerings during the past 12 months.
The rising sea evidently has not lifted all ships. Except for a few bright spots here and there, California is still in the toilet and Florida's petroleum marketers may just now be finished licking their wounds after experiencing longer-than-expected post-tank-replacement syndrome. New convenience store entrants into the Florida and Carolina markets should help business in the Southeast.
Although the regulations concerning diesel exhaust fluid (DEF) went into effect in January of 2010, indications are that a tipping point has been reached, in both the commercial and retail sectors of the industry. The movement from jugs to mini-bulk to bulk―particularly underground―solutions has accelerated as more trucks and diesel-fueled automobiles require DEF. And the prospects for DEF storage and dispensing business only improve as time goes on.
There is a buzz in the industry about compressed natural gas (CNG)
refueling. We could go on and on recounting what members told us about CNG
fueling prospects while attending PEI's CNG Fueling Station Design &
Construction Course February 23-24 in Las Vegas, but we will resist the
urge. Suffice to say, as soaring gasoline and diesel fuel prices continue to make
headlines, and CNG retail prices average just $2.39 per gasoline gallon equivalent, CNG as a way to
power truck fleets―and passenger vehicles?―must
be considered. By the way, PEI's May CNG Fueling Station Design & Construction
Courses in Chicago and Baltimore are sold out.
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E15 is the industry's 900-pound gorilla. As we said in the last TulsaLetter, E15 is a subject that significantly complicates the lives of petroleum marketers everywhere. They don't want to think about it, much less plan for it. PEI distributors tell us that going through the hassle and expense of equipping a station to handle E15 is NOT a subject of discussion with their customers at this time. Liability issues still have to be resolved, and marketers must be convinced that they can make money selling the product before E15 can be sold. With the price of oil up and the price of ethanol down, E15 may be more economically attractive than before. Ultimately it may not be the price of ethanol, but the value of the RIN (renewable identification number) that will incentivize marketers to go with E15. Time will tell.
Other takeaways from our conversations:
EPA RESPONDS TO QUESTIONS ABOUT PEI'S RP1200
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The TulsaLetter (ISSN 0193-9467) is published two or three times each month by the Petroleum Equipment Institute. Robert N. Renkes, Executive Vice President, Editor. Opinions expressed are the opinions of the Editor. Basic circulation confined to PEI members.