March 9, 2016 | Vol. 66, No. 5
Dear PEI Member:
We have talked with more than 300 members and their customers from February 4 to March 3 at three PEI committee meetings, the PEI Young Executives Winter Conference and the annual conventions of 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 2016.
Many members are bullish about business. Most are busy; some are very busy. Looking back on the last three months, members remark that they haven’t had to deal with the harsh winter that typically challenges construction projects and crews. That said, while service station construction work is fairly plentiful, competitors are keeping the margins small. Margins for commercial and industrial construction (emergency generators, fleet fueling, aviation fueling) are higher for companies that serve those markets.
A few members that are down in total sales are showing more profit than last year.
Manufacturers agree that domestic distributors are doing just fine. When we asked a dozen manufacturers to name distributors that were slower than usual to pay, they couldn’t come up with more than one name—and the distributors identified were all different!
Petroleum marketers have made money and the cost of capital is still relatively cheap. The issue is not if they have the money to spend, it’s how they will choose to spend that money.
Consolidation among petroleum marketing companies shows
no sign of slowing. State petroleum marketing association executives almost
universally lament a decline in membership numbers as smaller petroleum
marketers/oil companies are purchased by larger companies.
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The hectic pace of consolidation among PEI distributors and service/construction companies seems to have eased a bit. While a good number of companies still want to sell, the number of potential purchasers is not that large—and they are being choosey about what they buy and the price they pay. Acquisitions of decent sized companies seem to be taking longer than they used to take.
Europay, Mastercard and Visa (EMV) upgrades have many of the service departments across the country busy. Much of the work is still in-store, as petroleum marketers try to comply with the in-store October 2015 deadline. We hear that credit card companies are being aggressive in their chargebacks for inside-the-store fraud. As instances of chargebacks spread and are publicized, that might encourage more marketers to upgrade on the island. Stations in rural areas and single-store operators will be the last to comply—if they stay in business. EMV will negatively affect other parts of the industry as capital is reallocated from new station builds and image upgrades to fund the EMV upgrade.
The need for service technicians—especially trained veterans with a proven track record—is at the top of the wish list for almost all companies offering service. Signing bonuses have become more common, and some companies have run “help wanted” ads in regional and national industry publications.
With the price of gasoline and diesel in the $1-$3 range, CNG/LNG refueling installations are down in numbers, but don’t count them out. Some work is still out there, but the majority of the companies that build those stations are biding their time until the price of gasoline goes back up and CNG/LNG vehicles are again a competitive option.
OUST RELEASES GUIDANCE DOCUMENT FOR NEW REGULATIONS
Checklists prompt the user to look closely at what kinds of equipment are in use and how to keep that equipment working properly over the lifetime of the UST system. In addition, the manual provides recordkeeping forms to help the UST owner and operator keep equipment operating properly.
HUSKY ACQUIRES OHIO AUTOMOTIVE AFTERMARKET
EARLY-BIRD REGISTRATION FOR PEI WOMEN CONFERENCE
CLOSES MARCH 11
Early-bird registration for the conference closes March 11. The early-bird rate is $495 for PEI Women members ($595 for non-members, which includes a lifetime membership in the PEI Women program). After March 11, the fee increases to $595 for PEI Women members; $695 for non-members. The registration fee includes all sessions, materials and meals. To learn more and register, visit www.pei.org/women2016.
STI-SPFA ELECT OFFICERS AND DIRECTORS FOR 2016
DEADLINE TO APPLY FOR CHARLES D. KEMP SCHOLARSHIPS
IS MARCH 31
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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.