March 17, 2014 | Vol. 64, No. 5
Dear PEI Member:
We have a great opportunity each year to meet and talk with more than 150 members and their customers from February 18 through March 9 at three PEI committee meetings and the annual conventions sponsored by the Western Petroleum Marketers Association (WPMA), the Petroleum and Convenience Store Exposition of Mid-America (PACE), and the Southeast Petro-Food Marketing Exposition (SE Petro). Based on what they told us, here’s our take on the prospects for the rest of 2014.
Overall, this year is shaping up to be better than 2013, but not by much. Distributor sales are a real mixed bag. It seems that if sales are up, profit margins are down. Conversely, some told us that margins are up but sales are off. It is rare to find many distributors with profits AND margins up over last year. And fortunately, there are only a handful of companies where both sales and profits are down.
Those that see pressure on both sales and margins attribute their problems to the increased presence and market penetration of the very large sales-related distributors. As is often the case this time of year, the weather in many parts of the country has put construction projects—and accompanying sales—on hold. Geography doesn’t seem to play as much of a factor as it has in the past—winners and losers can be found in all states.
Expect more merger and acquisition activity. There are deals in the works that are not just involving the acquisition of competitors weakened by the recession. Some mergers and acquisitions will see strong companies seeking a competitive advantage by joining forces.
Other takeaways from our conversations:
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EPA SETS TIER 3 MOTOR VEHICLE EMISSION AND FUEL
The rule’s most immediate effect will begin in 2017, when the EPA will require refiners to reduce the annual average amount of sulfur in gasoline to 10 parts per million (ppm), which is down from today’s standard of 30 ppm. The Tier 3 rule follows EPA’s 2000 Tier 2 rule, which reduced sulfur in gasoline from 300 ppm to 30 ppm.
In addition to the gasoline requirements, the regulation will require phased-in changes to vehicles, including stronger tailpipe and evaporative emissions standards, beginning in model years 2017 to 2025. The cost of the standards will average $72 per new vehicle, EPA said.
The rule’s compliance timing coincides with the requirements of EPA’s greenhouse gas emissions and fuel economy standards for passenger vehicles, which begin with model year 2017 vehicles.
EPA finalized the Tier 3 rule largely as proposed. However, in one change, EPA will use E10 as a certification fuel, rather than E15, which EPA initially proposed. The entire rule is available at www.epa.gov/otaq/tier3.htm
The deadline to complete PEI’s 2014 Employee Compensation Survey has been extended until March 31. The survey is open only to PEI distributor members. If you do not have a copy of the survey form and would like to receive one, contact Chris Bouldin at 918-236-3964 or firstname.lastname@example.org.
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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.