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December 20, 2018 | Vol. 68, No. 24

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In This Issue

Dear PEI Member:

The petroleum equipment industry is facing a number of potential disruptions in the next few years. Electric vehicles, artificial intelligence, mobile fueling and other forces may transform the way manufacturers, distributors and fuel marketers do business.

But the biggest disruptor of all might be Amazon Business, the two-year-old B2B marketplace that allows distributors and other businesses to list and sell products on the world’s largest online platform. Amazon Business lets buyers compare prices and take advantage of attractive features including same-day shipping on some items and free two-day shipping on more than 100 million others. Buyers also receive 90-day terms or 5 percent back on their purchases, along with customized reports to help them better manage their purchasing.

Amazon Business already has disrupted historical supply chain relationships in electronics, HVAC and other distribution-based industries.

So far, however, Amazon Business is little more than a blip in our industry. Few petroleum equipment distributors sell through Amazon Business, and Amazon isn’t yet a distributor for components used to store, meter and dispense fuel. But how long will this last? Could Amazon Business disrupt the historical relationship between petroleum equipment manufacturers, distributors and customers?

PEI Editor-in-Chief Kristen Wright and I recently participated in a two-day forum on Amazon Business sponsored by Modern Distribution Management (MDM). Led by Tom Gale, CEO of MDM, and Ian Heller, president and COO, presenters explored the potential impact of Amazon Business on wholesale distribution.

Amazon Business

Octane and Ethanol

Eastern States Push Renewable Fuels


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Here are my top six takeaways:

  1. Amazon isn’t stupid. Distribution is a potential goldmine for Amazon. In only two years, Amazon Business has reached $10 billion in annualized sales. These sales also bring huge profit margins because the third-party sellers bear most of the costs of sale—from inventory to capital expenses. Amazon’s primary responsibility—the digital infrastructure that runs the show—is leveraged from the company’s consumer site. Moreover, scaling a business through technology is one of Amazon’s greatest strengths, so capturing a greater share of the $5.6 trillion wholesale distribution economy is within its reach.

  2. Our industry isn’t immune. If you think the complexity of fuel handling equipment protects you from Amazon Business, think again. In other industries, Amazon Business provides a marketplace for technical equipment and then hires local contractors for installation and service. Amazon Business may not duplicate the way you sell, but its proven technology and customer focus offer real value.

  3. Amazon can’t be trusted. There are lots of reasons a distributor might decide to sell through Amazon Business, including: access to more customers; the ability to leverage Amazon’s shipping capabilities; and the opportunity to tap into the world’s most sophisticated e-commerce system without a major capital investment.

    However, going all in with Amazon Business is not without risk. Remember, Amazon Business isn’t a passive technology company. It also is a formidable competitor. Amazon is working to become a super distributor on the same platform it has created for other distributors’ products.

    Distributors who commit to Amazon Business are handing their digital futures and sensitive customer data to a potentially fierce competitor.

    Can you trust Amazon? As MDM’s Ian Heller said at the forum, “Amazon absolutely can be trusted to do whatever is in their best interest.” It’s called capitalism. Amazon Business might not want to put other distributors out of business, but it doesn’t particularly care whether those distributors survive.

  4. Distributors have options. Even if Amazon Business enters our industry, traditional petroleum equipment distributors who don’t want to join the platform can prosper through other business strategies. Speakers at the MDM forum mentioned three options.

    One, respond to the challenge with continuous improvements that will make you a better distributor. Competition often is the spur that makes strong businesses even stronger.

    Two, become a different kind of distributor through new lines, markets or services. The 2018 PEI State of the Industry survey showed many PEI members already are taking this route. Traditional retail fueling work is declining as a percentage of total sales, with car washes, alternative fuels and commercial business climbing.

    Three, transform your business. One speaker at the forum speculated that distributors in some industries will abandon or scale back their inventories and become super-contractors that mostly serve Amazon Business customers. That’s probably an extreme idea, but reinventing your business is not. If old lines of business become less profitable, find new ones. 
  5. The disruptor could be disrupted. On Sept. 13, the Federal Trade Commission (FTC) initiated hearings into whether Amazon is violating federal antitrust laws. If the FTC breaks up or heavily regulates Amazon, the company might decide to become a friendlier competitor or exit wholesale distribution altogether.
  6. An anti-Amazon platform could emerge. Some experts suggested the threat of Amazon Business might prompt distributors to create their own cross-industry digital marketplace. To succeed, such a platform would require a critical mass of participants, innovative technology, reliable freight partners and distributors willing to work together. No small task, to be sure. But if it could be done, the new platform would have several advantages over Amazon Business:
    • Lower costs and pricing. A distributor-led marketplace that needed only to cover its costs should be able to undercut Amazon Business’ prices substantially.
    • Control of customer data. Participants in a distributor-led B2B platform could keep and protect all their information rather than being forced to hand it to a competitor.
    • Installation and service business. The anti-Amazon platform could be designed to help equipment providers bundle service revenue in with distribution.

The future of Amazon Business in petroleum equipment distribution is uncertain. But we’ll be watching. You should too.

The U.S. House Energy and Commerce Subcommittee is considering a bill that would replace today’s Renewable Fuel Standard (RFS) with a federal octane requirement and make other notable changes to the Clean Air Act. Beginning in 2023, the bill would:

  • Require vehicle manufacturers to build and warrant light-duty vehicles for fuel blends with up to 20 percent ethanol.
  • Require vehicle manufacturers to build and warrant light-duty vehicles for gasoline with a research octane number (RON) of 95 or higher.
  • Require vehicle manufacturers to incorporate technically and economically feasible devices or features that would prevent misfueling of the new vehicles.
  • Require fuel marketers to incorporate technically and economically feasible devices or elements to make their gasoline dispensing equipment compatible with 95 RON fuel.
  • Shield vehicle manufactures and fuel marketers that are in compliance with the compatibility and misfueling requirements from liability for damages resulting from unlawful misfueling.
  • Direct the FTC to prescribe in-vehicle and point-of-sale warnings to protect consumers from misfueling.
  • Make year-round E15 sales possible by extending the summertime Reid vapor pressure (RVP) waiver to blends containing more than 10 percent ethanol.
  • Require newly installed gasoline dispensing equipment to be compatible with fuel blends of up to 20 percent ethanol.

The bill, known as the 21st Century Transportation Fuels Act, is sponsored by subcommittee chairman John Shimkus (R-IL) and Rep. Bill Flores (R-TX).

Nine northeastern and mid-Atlantic states and the District of Columbia announced plans to develop a program that would limit allowable pollution from transportation fuel and charge fees to entities that exceed the limits. The states then would invest the fees in clean transportation technologies including zero-emission vehicles and mass transit. The nine states participating with the District of Columbia are Connecticut, Delaware, Maryland, Massachusetts, New Jersey, Pennsylvania, Rhode Island, Vermont and Virginia.

The California Department of Food and Agriculture's Division of Measurement Standards is considering a proposal to allow but not require automatic temperature compensation (ATC) devices on gasoline dispensers in the state. The California Fuels & Convenience Alliance (CFCA) opposes the measure, in part because of a fear that passage could lead to mandatory ATC.
Pennsylvania. The Pennsylvania Department of Environmental Protection (DEP) has traced the source of petroleum contamination in the Harrison sewer system to an abandoned underground storage tank under a convenience store that once had been a gas station. After determining the extent of the contamination, DEP will begin remediation procedures and initiate closure or removal of the tank.

Joseph “Joe” Radermacher, age 66, died Dec. 5, 2018. An active PEI member, Radermacher was the longtime president and CEO of Pump and Meter Service in Hopkins, Minnesota. In January 2018, he stepped down as president of the company but retained the CEO role. Survivors include Collen, his wife of 44 years; children, Amy, Kelly, Eric and Kurt; and siblings, Cheri, Tom, Connie, Carol and Cathy.

The Jones Covey Group
hired Mark Shirley as program manager for testing. Shirley has 18 years of experience in the petroleum industry.
Matrix Capital Markets Group Inc. advised Giant Eagle in its acquisition of Ricker Oil Co., Inc., a wholesale fuels distributor and owner of 56 convenience stores in central Indiana.
Seneca Companies named Chris Biellier vice president of environmental services and strategic partnerships. Biellier has been at Seneca for more than 14 years, serving most recently as vice president of the company’s environmental services and waste solutions divisions.
Vapor Systems Technologies retained Caliber Professional Sales Services as its representative for Arkansas, Louisiana, New Mexico, Oklahoma and Texas.

California service company.
AW Associates Inc., 2045 California Ave., Suite 101, Corona, CA 92878, applied for service and construction division membership. Kathy Wilkerson is president of the firm, which was established in 2009. AW Associates, Inc. is a fuel system service, maintenance, repair and compliance company. Sponsored for PEI membership by Glen Corkill, Source North America, Dania Beach, Florida.

South Carolina construction company. Quality Quick, 340 Shell Brooke Way, Lexington, SC 29073, applied for service and construction division membership. Kenny Patel is manager of the firm, which was established in 2016. Quality Quick is a service company for the petroleum equipment industry. Sponsored for PEI membership by William Rodriguez, Integrated Petroleum Equipment Co., Plainview, New York.


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Petroleum Equipment Institute
P. O. Box 2380
Tulsa, OK 74101-2380

The TulsaLetter (ISSN 0193-9467) is published two or three times each month by the Petroleum Equipment Institute. Richard C. Long, Editor. Opinions expressed are the opinions of the Editor. Basic circulation confined to PEI members.