Fuel Marketer News Magazine Fall 2107 by Fuels Market News

FALL ISSUE 2017

Your Source for News and Information

Gouging, Hoarding and Market Disruptions Oil Market Rebalancing and the Arabian Peninsula Interview with PEI Executive President

Rick Long

Regulations and Retailer Growth

A Pivotal Balancing Act Three Strategies to

Increase Profits with a Car Wash

S U P P L Y, M A R K E T I N G , D I S T R I B U T I O N , T R A N S P O R T A T I O N & L O G I S T I C S

PUBLISHER’S NOTE

EDITORIAL STAFF President and Publisher Gary D. Bevers GBevers@EpicNewsData.com Editorial Director and Digital Publisher Keith Reid KReid@EpicNewsData.com CAO and Associate Publisher Kathy Bevers KBevers@EpicNewsData.com Managing Editor Kyndall P. Krist KKrist@EpicNewsData.com Industry Analysts/Editors Frank M. Hunter FHunter@EpicNewsData.com Nancy Yamaguchi, Ph.D. NYamaguchi@EpicNewsData.com Columnists and Contributors Greg Cushard Vladimir Collak Shane Dyer John Eichberger Doug Haugh Corey Henriksen Maura Keller

A note from

Gary Bevers, Group Publisher Along came Harvey… As we were beginning to put together this issue of Fuel Marketer News, my wife and I found ourselves fleeing Houston, racing out of town barely ahead of what was by now Tropical Storm Harvey. As we rode out the storm safe and sound in Dallas, we watched with morbid fascination from the safety of our hotel room the images on TV as our city seemed to sink under water. Our home was safe, but one afternoon we watched the news as boats were motoring down the highway, now a lake, in front of our office building where the water rose 13 feet and wiped out the bank on the first floor! It was seven days before the roads were clear enough for us to drive back to our home in northwest Houston. Oddly enough, we drove out of Dallas during a severe gas shortage to find our local Houston neighborhood station had fuel when we finally got home. With between 25 – 50+ inches of rain falling on South Texas, from Corpus Christi to Houston to Beaumont before turning back ashore to hit Lake Charles, Louisiana, Harvey turned out to be one of the largest rain storms to hit the U.S. It caused a record-breaking 10,000-year flood in Houston alone.

Alan H. Levine

And, through it all, the first responders and emergency services had fuel—the life

Joseph H. Petrowski

blood of ground, air and water-borne craft—to rescue those in need. With critical

W. Brian Reynolds Fred M. Whitaker Editorial Board Ed Burke Lisa Calhoun George A. Overstreet, Jr. Joseph H. Petrowski Art Director Jeff Beene JBeene@EpicNewsData.com Account Manager Don M. Hester, Jr. DHester@EpicNewsData.com Digital Products Business Manager Joe A. Martinez JMartinez@EpicNewsData.com Digital Marketing Specialist Scott A. Croom SCroom@EpicNewsData.com Advertising Sales Greg Mosho c 732-610-5735 GMosho@EpicNewsData.com Mailing Address 15201 Mason Road, Suite 1000-288 Cypress, TX 77433 www.FuelMarketerNews.com © Copyright 2017, FMN Media, LLC All Rights Reserved.

lessons learned by the Texas fuel distribution industry from Hurricanes Katrina and Rita, and then successfully put into place in time for Hurricane Ike, Texas search and rescue and emergency services (and the Cajun Navy!) were able to stay on the job and avoid the disasters of the stranded folks we all saw during Katrina and Rita. And then came Irma, and then came the headlines… Wide-spread price gouging! Retailers overcharging for gasoline! And on and on. But, for an objective, in-depth analysis, see Keith Reid’s article titled, “Gouging, Hoarding and Market Disruptions.” You will receive a rational discussion on what price gouging is and is not, and some suggestions on what you as a fuel retailer can do to both protect yourself from unfair accusations and still do right by your customers. Our goal at FMN is to provide you with valuable information, education and analysis, from the seismic shifts in crude production to the nuances of motor fuels retailing and forecourt technology. In this and every issue of FMN, our energyexpert columnists strive to deliver objective analyses of the facts, changes and trends in our industry, and what that means to you as a fuel marketer. As we continue to offer new, value-added fuel-related services to our publication, we promise to work hard to make sure you have every reason to make us your go-to news source for motor fuels buying and supply. Register for our e-newsletter at www.FuelMarketerNews.com to get in the loop as new content gets posted. Registration is free, and the process is short and easy.

TABLE OF CONTENTS

PUBLISHER’S NOTE

FUELS & SUPPLY

Gouging, Hoarding and Market Disruptions by Keith Reid

Hurricane Irma and More Price Gouging Accusations by Keith Reid

Reports of the Demise of Petroleum Transport Are Greatly Exaggerated by Joe Petrowski

14 14

58 RETAIL OPERATIONS

Regulations and Retailer Growth: A Pivotal Balancing Act by Joe O’Brien

Ready or Not: How to Efficiently Address the 2018 UST Regulations by Ed Kammerer

Expanding Mobility Continues to Drive Global Demand Growth by Doug Haugh

Oil Market Rebalancing and the Arabian Peninsula by Dr. Nancy Yamaguchi

Three Strategies to Increase Profits with a Car Wash by David Dougherty

Dispenser Filters: It’s Time to Take Them Seriously by Dwight Rutledge

WHOLESALE & FLEET OPERATIONS

32 32

Cap Your Diesel Fuel Costs for 2018: A Handy Hedging Strategy by Darren Dohme What Vehicles and Fuel Solutions Will Tomorrow Bring? by Keith Reid Lower Carbon Intensity Solution: How Biodiesel Has Become the Answer to Emission-Cutting Initiatives by Troy Shoen

88 93

FMN Interviews STI/SPFA Executive Vice President Wayne Geyer by Keith Reid

BUSINESS OPERATIONS

FMN Interviews PEI Executive Vice President Rick Long by Keith Reid

How to Run a Business That Is Not For Sale by Ann Pitts

Five Trends Changing the Way We Think About Medical Costs and Benefits Value by Ron Leopold, MD

100 INDUSTRY NEWS 110

ADVERTISER’S INDEX

by Keith Reid

Gouging, Hoarding and Market Disruptions Hurricane Harvey wreaked havoc on the Texas Gulf Coast, and price gouging

is in the news again as a result. The Fort Worth Star-Telegram reported that a local TV crew found hotel rates doubling or tripling compared to the pre-storm rates. There were $99 cases of bottled water and reports of gasoline at $10 per gallon. The Star-Telegram article quoted that more than 500 complaints of price gouging have been lodged with the Texas attorney generalâ&#x20AC;&#x2122;s office.

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FUELS & SUPPLY POLICY BRIEF

Is Price Gouging Actually Possible?

High prices, particularly related to gasoline, tend to be an extraordinarily emotional issue given our country’s fixation and dependence on the automobile. Couple that with the trauma of a natural disaster, and you get a public outcry for “justice” with any perception of retailers taking advantage of the situation.

The philosophical question, and most certainly not the legal one in those states with price gouging laws on the book, is whether or not price gouging is actually real. In a competitive free market system, the price of the good is determined in part by scarcity and is set by what the customer is willing to pay. While the goal of price gouging laws is always stated as being to protect consumers, these emotionally satisfying laws hurt consumers in many ways.

Accusations of price gouging are not new to the fuels industry. Gasoline prices went from being low and fairly stable during the 1990s to increasingly volatile and high during the early 2000s. Virtually any real or potential disruption—a pipeline break, refinery fire, instability in the Middle East or a natural disaster—would lead to an immediate and often dramatic increase in prices. High prices, particularly related to gasoline, tend to be an extraordinarily emotional issue given our country’s fixation and dependence on the automobile. Couple that with the trauma of a natural disaster, and you get a public outcry for “justice” with any perception of retailers taking advantage of the situation. Politicians—from mayors to congressmen to attorneys general—find this outcry to be irresistible. Over the years, there have been numerous price gouging investigations from the local to federal level, although that has dropped off significantly in more recent times. There are several reasons for that, including industry associations (from the American Petroleum Institute [API] down to smaller organizations) conducting public education efforts, and post-fracking and commodities reforms that have lowered prices and reduced volatility. Even an event as disruptive as Hurricane Harvey is having a relatively muted effect—so far—on fuel prices compared to previous events like Hurricane Katrina.

“”

Disaster situations trigger a hoarding response among the impacted population. Store shelves empty rapidly, as do underground retail fuel storage tanks. Because of the disruption of the supply infrastructure, once those shelves or tanks are empty, it may take weeks for them to be restocked.

When investigations were conducted, those at the federal level almost uniformly determined that little price gouging occurred and pricing was largely related to the dynamics of disrupted markets and increased supply costs. At the local level, such investigations have often taken the form of witch hunts where some degree of public justice is required regardless of the facts. A typical pattern involves casting a wide net and charging numerous businesses, often with a fine that is so low that only an extraordinarily stubborn retailer would refuse the settlement. FMNMagazine

FuelMarketerNews.com

Three gallons of gasoline might get a person 60 – 90 miles out of the danger zone for a total of $30. That’s one heck of a deal compared to being stuck in the devastation because no gasoline could be found.

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FUELS & SUPPLY POLICY BRIEF

Gouging, Hoarding and Market Disruptions While this is entirely logical, it is not emotionally satisfying. Tim Worstall, Senior Fellow at the Adam Smith Institute, made this point about gouging laws and Hurricane Harvey in a recent Forbes article. He expanded the idea to include the thought that it prevents the government from stepping in and setting up a range of direct controls over pricing, as well as encouraging a more rapid reintroduction of product supplies into the market. This fairly common economic viewpoint was so shockingly politically incorrect for Forbes that it pulled the article shortly after publication.

Given the potential liabilities from monetary fines (between $20,000 and $250,000 in Texas) and the damage to an established retail brand, it’s best to consult qualified legal advice and the attorney general’s office on the specific parameters to abide by before a disaster strikes.

Play by the Rules

Raising prices during any kind of natural disaster will tend to see a retailer considered guilty until proven innocent in the realm of public opinion. Customers, the media and politicians (especially politically astute attorneys general) will not be bending over backward to give the benefit of the doubt.

People who might have enough gasoline in their vehicles to ride out a disruption will often “top off the tank,” and in many cases fill a range of containers with as much gasoline as they can manage, “just in case.” As long as the fuel and other supplies are priced cheaply, that behavior is encouraged.

A number of states, including Texas, have laws against price gouging based on a range of criteria—sometimes specific and sometimes opaque. For example, Texas Attorney General Ken Paxton’s office noted, “Although state law prohibits vendors from illegally raising prices to reap exorbitant profits during a disaster, it does allow retailers to pass along wholesale price increases to customers. Thus, in some cases, increased prices may not necessarily signal illegal price gouging.” You could make a lot of assumptions from the above statement when determining a street price during a disaster. Perhaps those assumptions are correct, and perhaps the attorney general’s office has a different viewpoint about the meaning of “…pass along wholesale price increases to customers…” than your interpretation (or even industry norms).

Gallons of fuel are taken out of the marketplace that might not actually be used until after a crisis is over. With a common range of 300 miles on a tank of gas, most people could drive to a safer and more comfortable place on half of a tank. They could certainly drive to locations where supply and pricing are not impacted. For those sitting it out at home, there’s probably not a lot of commuting or other travel taking place.

Now, take the $10-per-gallon gasoline noted earlier. At this price point, hoarding behaviors will likely be stunted. Underground storage tanks (UST) that would rapidly empty out in the earliest stages of the crisis could have fuel on hand (as long as the pumps are working, at least) for those individuals that got caught significantly short. Three gallons of gasoline might get a person 60 – 90 miles out of the danger zone for a total of $30. That’s one heck of a deal compared to being stuck in the devastation because no gasoline could be found.

Ironically, it’s not as if fuel retailers are immune to the impacts of a disaster situation any more than their customers. A fuel retailer in this situation likely faces uncertain fuel supply, perhaps significant losses in revenue and often significant increases in costs associated with being in a disaster zone. Insurance, while extraordinarily valuable, does have its limitations, and suppliers, lenders and creditors are not typically going to be facing a price gouging investigation if they require existing commitments to be paid. n

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FUELS & SUPPLY POLICY BRIEF

Hurricane Irma and More Price Gouging Accusations by Keith Reid

“ ”

The demand aspect on supply was also particularly active during Irma, as the usual consumer hoarding impulses were additionally driven by what amounted to a call to evacuate much of the state.

As I noted on the preceding pages in the policy brief

“Gouging, Hoarding and Market Disruptions,” price gouging is in the news once again. That article contains a general discussion of how price gouging accusations have played out primarily in the early- to mid-2000s as the industry entered an era of a Balkanized fuel supply, tighter inventories and an overall increase in price volatility. That era has only recently died down following various commodity reforms and the amazing supply dynamics brought about by fracking. While there is no need to cover the all of the same ground here, Hurricane Irma with its broad impact over multiple states has intensified gouging sensitivities. With a primary focus on Florida, price gouging complaints rolled in by the hundreds and then thousands as a crisis intensified. The complaints focused on a great number of goods and services, with airline prices getting special attention, and fuel, of course, found itself prominently in the mix. As I previously noted, price gouging investigations at the federal level have generally determined that while such practices do exist, they tend to be uncommon among petroleum retailers, and most price movement tends to be a reflection of wholesale pricing and supply dynamics. In Florida, during a state of emergency retailers are advised not to grossly raise their prices beyond the pricing history for that product over the past 30 days. However, they are allowed to defend such increases based upon market factors. The EIA’s This Week in Petroleum (September 13) outlined the extent and reason of the retail price increases in the market: because Florida is largely dependent on marine

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movements from refineries of the U.S. Gulf Coast, any threat of or actual disruption to that supply, such as Hurricane Harvey, will result in higher prices in Florida markets. From August 21 to August 28, when Hurricane Harvey made landfall in Texas, the retail gasoline prices in Florida and Miami increased 10 cents and 5 cents per gallon (gal), respectively. Then as Hurricane Irma approached, increased demand and falling inventories caused Florida and Miami gasoline prices to increase $0.40/gal and $0.39/gal, respectively, between August 28 and September 4. The demand aspect on supply was also particularly active during Irma, as the usual consumer hoarding impulses were additionally driven by what amounted to a call to evacuate much of the state. Matching—and perhaps even eclipsing— price gouging accusations were the reports of stations that had run out of gasoline. This reinforces the idea that by not allowing a market to adjust more aggressively to shortages, or having some form of government sales volume control, a gallon of expensive gasoline can be worth far more than no gasoline for somebody desperately trying to leave the danger area. Retail prices tended to average in the $2.70 set range throughout the crisis, though there were reports of some stations charging $4 or higher—much higher in a few cases. Given that such disasters typically hit retailers just as hard as their customers, such extraordinary pricing might be an attempt to profiteer on the situation (though obviously at the expense of potential price gouging lawsuits and brand damage) or it could easily be more marginal operations desperately trying to stay in business. n 10

FuelMarketerNews.com

by Joe Petrowski

Reports of the Demise of Petroleum Transport Are Greatly Exaggerated The famous paraphrase from Mark Twain, “The reports of my death are greatly exaggerated,” shows that Twain had insight and a sense of humor about the doomsayers and pessimists of his day. Along those lines, there has been much chatter about the end of the oil and gasoline era as a result of electric cars, hydrogen Corporate Average Fuel Economy (CAFE) standards and ride sharing. It seems that doomsayers can never be satisﬁed. In my lifetime, I have witnessed the following fears and predictions:

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• We will run out of food to feed the world! • We will run out of oil and natural gas! • We cannot ﬁnd a home for our waste! • The planet has reached a tipping point on temperature from which there is no escape! • The oceans are overﬁshed!

FMNMagazine

FuelMarketerNews.com

If you come up with strategies to sell natural gas fuels, develop electric charging stations around your brand and hit $20,000 per week in inside sales at a 30% margin, you can generate $500,000 per site per year in gross margin. You can then laugh heartily at the doomsayers.

FUELS & SUPPLY

Instead, this is what I’ve seen develop:

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• The lowest real prices on food in human history and record rates of obesity with 5% of the U.S.population receiving subsidized food. • We now enjoy the largest stocks of hydrocarbons and the largest proven reserves in history.

So, to sum it up: • Electric: 41 million gallons of displaced petroleum • Eﬃciency: 12.1 billion gallons of displaced petroleum

• Over 1,000 landﬁlls and digesters are producing biogas, power and are desperately seeking waste product.

• Light-duty hydrogen or natural gas: 2 billion gallons of displaced petroleum

• For at least the past two years, global temperatures have decreased.

Let’s round up and say that the total displaced petroleum equals 15 billion gallons, so our annual petroleum consumption as a transport fuel drops to 146 billion gallons. With 160 million fueling sites, that’s still about 912,000 gallons per site per year, or 17,000 gallons per week.

• Fish catches hit a record high and lobsters are cheaper in real terms than when they were used as prison food in New England’s early days. The lesson learned is that the dire predictions about the future of petroleum transport need to be examined carefully before the hand-wringing begins. We currently consume 161 billion gallons of gasoline annually with 263 million passenger vehicles (45 million of which represent a household’s second or third car). That’s 613 gallons per vehicle per year, or 11.8 gallons per car per week, which is the average fuel sale—funny how that works! Nationally, 70% of households still drive to work, and 80% drive for vacation or home visits with a distance of over 100 miles twice a year. Assume electric vehicles capture 100% of the second- and third-car market (that’s an overly aggressive scenario, but consider it for the point being made). That’s 28 million gallons of displaced gasoline per year. Assume in Tesla’s wildest dreams that electric cars capture 10% of the 218 million primary vehicle market, that’s 21 million vehicles— and another 13 million gallons of gasoline displaced. Now, assume that with 66 million electric cars, we still have 197 million petroleum-powered vehicles, and assume a 10% eﬃciency pickup through a combination of CAFE standards, lighter composite materials and bio-binging— that’s 12.1 billion gallons displaced. Assume all 10 million light-duty trucks and vans switch to natural gas, which is cheaper and creates less carbon dioxide (CO2)—that’s 2 billion gallons of displaced petroleum. FMNMagazine

There has been much chatter about the end of the oil and gasoline era as a result of electric cars, hydrogen CAFE standards and ride sharing. It seems that doomsayers can never be satisﬁed.

Additionally, if you come up with strategies to sell natural gas fuels, develop electric charging stations around your brand and hit $20,000 per week in inside sales at a 30% margin, you can generate $500,000 per site per year in gross margin. You can then laugh heartily at the doomsayers. That’s 9.5 million barrels per day of oil production and refining capacity that will not make Carl Icahn or the independent refiners happy, but it’ll make those long renewable identification numbers (RIN) almost giggly. n

READ MORE at FuelMarketerNews.com

Joe Petrowski Joe has had a long career in international commodity trading, energy and retail management and public policy development. In 2005, he was named President and CEO of Gulf Oil LP and elected to the Gulf Oil LP Board of Directors. In October 2008, he was named CEO of the now combined Gulf Oil and Cumberland Farms, whose annual revenues exceed $11 billion and who now operates in 27 states. In September 2013, Petrowski stepped down as CEO of The Cumberland Gulf Group. He is now the Managing Director of Mercantor Partners, a private equity firm investing in convenience and energy distribution. Joe is also a member of the Gulf, Yesway and Green Print, LLC boards. FuelMarketerNews.com

FUELS & SUPPLY

Expanding Mobility Continues to Drive Global Demand Growth by Doug Haugh

fter participating in the Fuels For 2020 conference in Turnberry, Scotland, this September, I left with one overarching conclusion. Mobility is going to keep increasing, and while the emissions resulting from all that moving around are going to improve, we are not going to see a reduction in carbon emissions anytime soon. Three days of a packed agenda covered a wide range of topics, very few of which should have had any direct connection to electric vehicles (EVs) or battery technology, yet every single one ended up being inextricably connected to the topic of the day. I recall industry conferences and gatherings back in 2000, where no matter the agenda, all anyone talked about was the internet. Then, in 2010, everything was connected to the new app economy being born with the huge sales of smartphones. What has become obvious in the last year is that EVs and everything associated with them haveâ&#x20AC;&#x201D;for our industry at leastâ&#x20AC;&#x201D;taken on this same status as the overpowering theme that every presenter must address or risk being left out of the conversation.

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FUELS & SUPPLY

Expanding Mobility Continues to Drive Global Demand Growth your own vehicle’s performance at http://www.equaindex.com.

Each speaker was also consistent in that while the transportation market will go through tremendous change over the next 20 years, oil demand likely will not peak globally until 2035 or later. Meaning that for the next 15 years, the demand for oil will still be growing each year.

A presentation by an esteemed geologist from a nearby university on fracking and shale gas reserves in the UK did indeed talk about those reserves, but there was a shadow, a strange light to each statistic. Every prediction, forecast and conclusion was delivered with new caveats and conditioning statements that were heard over and over— essentially all forms of the fundamental question, “When EVs are adopted at x rate over y years, what happens to our industry?” Despite all of the attention, each speaker was also consistent in that while the transportation market will go through tremendous change over the next 20 years, oil demand likely will not peak globally until 2035 or later. Meaning that for the next 15 years, the demand for oil will still be growing each year. Demand will decline in the U.S., EU and Japan, but these declines will be offset by continued increases in Africa, Asia and the rest of the world. What is going to improve dramatically are the emissions of pollutants such as nitrogen oxide (NOx), sulfur oxide (SOx) and particulates. Unlike the carbon dioxide emissions that may create fatalities in the future, these are the pollutants that kill today and they are going to improve dramatically in the next few years. One of the reasons is the fallout from

The global shipping industry is finally starting their conversion to low sulfur fuels, moving off of Heavy Fuel Oil (HFO) to Ultra-Low Sulfur Fuel Oil (ULSFO), a fuel that hardly exists today. This conversion of between 4 and 5 million barrels

Nick Molden, Emissions Analytics

Volkswagen’s “Dieselgate” debacle, where the promise of clean diesels was revealed to be a falsehood. Nick Molden of Emissions Analytics presented on his company’s real-life measurement of emissions of actual vehicles driving on actual roads by real live drivers.

per day of fuel that is 50,000 ppm sulfur to fuel that is 5,000 ppm sulfur is going to impact the refining industry, the shipping industry and air quality globally.

The results were stunning. The average emissions of diesel vehicles “compliant” with EU6 regulations were six times the regulatory limit. Someone in the audience broke the stunned silence that met Nick’s comments by joking that maybe that’s why it was called EU “six.” Funny, but tragically so when one considers the health impacts. Ironically, while most of these vehicles are in Europe, it was an American investigation that revealed the fraud and not a single vehicle’s certification has been pulled in by the EU to date. Mr. Molden’s firm has produced a useful measurement called the EQUA Index and published a free tool on the web to check FMNMagazine

While emissions are improving dramatically for each mile of transportation delivered, the overall growth in demand for transportation is still expanding. This leads to another consistent conclusion: from academic researchers to industry forecasters, there was consensus that it’s going to get warmer. Regardless of the Paris agreement that the U.S. has now pulled out of, each speaker was quietly resigned to a warmer planet. This event may have been held at the Trump Turnberry resort, but there were no “climate deniers” in this crowd, just clear-eyed realists. Despite the facts that engine efficiency is growing a little every year and batteries are becoming cheaper, with each FuelMarketerNews.com

new factory expansion, overall carbon emissions are not headed down anytime soon. Increases in mobility lead to increased freedom, growing opportunity and expanding economic prospects for the past 200 years. These benefits will continue to increase with the adoption of autonomous vehicles, car sharing and an increasingly electrified fleet world-wide. I believe the increased transparency of real life emissions along with declining costs per mile of mobility delivered point to a better transportation future for all of us, but we are clearly in a race. A race to harvest those benefits while producing lower emissions as we transition to a more sustainable, electrified future that is going to take decades of innovation and investment to deliver. n

Douglas S. Haugh Doug is currently President and Chief Strategy Officer of Mansfield Energy. The company provides energy commodities and related services to 6,000 customers in 18,000 locations across the U.S. and Canada. The company’s expertise covers a broad range of transportation and facilities energy—from traditional petroleum products, CNG, renewable fuels and specialty chemicals to power and natural gas. Haugh is a frequent speaker on energy, supply chain technology and entrepreneurship. He can often be found leading general sessions or seminars at national conferences and conventions. He also blogs on energy issues at ThinkingOnEnergy.com. The opinions expressed there (and here) are his, and not those of Mansfield.

Oil Market Rebalancing Introduction

The global oil market is in a prolonged period of

adjustment, with a supply glut that has lasted far longer than anticipated. Forecasts of price and supply are being re-done in essentially every government, investment house, trading group and think tank.

by Dr. Nancy Yamaguchi

FUELS & SUPPLY

and the Arabian Peninsula As of the time of this writing in August 2017, the price of West Texas Intermediate (WTI) crude is below $48* per barrel (/b). Last year at this time, the market expected that the end of 2016 would bring a better balance between supply and demand and that oil prices would reach $50/b. They did, but only because key OPEC crude producers managed to achieve consensus on a production cut agreement. And since then, the $50/b level has not been maintained steadily.

Among the Middle Eastern OPEC countries, Iran only joined the agreement with the condition that it be allowed to modestly raise its output. Iraq pledged to cut output, but has boosted it instead. Therefore, the Arabian Peninsula countries are carrying the load of the production cuts. From a geopolitical standpoint, the Arabian Peninsula is often in the spotlight. It contains vast oil and natural gas resources, commands the ocean waterways surrounding it and has a long history of human habitation and strife. While oil truly is a global industry, the Arabian Peninsula is now playing a more critical role in rebalancing supply and demand, expanding its role in politics and diplomacy.

Within OPEC, the key members carrying the burden of the production cuts are in the Arabian Peninsula region, led by Saudi Arabia. Some would argue that this region played the largest role in creating the oversupply, and thus it should take the leadership in fixing it. But efforts to manipulate the market into balance are challenging, and sometimes they have unintended consequences. The participants hesitate to cut any further, since over half of the cuts they have made this year have been counteracted by expanded production in other countries. This article focuses on the Arabian Peninsula and its role in rebalancing the global crude market. In this region, the powerhouse country is Saudi Arabia, with the other countries being Bahrain, Kuwait, Oman, Qatar, the United Arab Emirates (UAE) and Yemen. Among the African OPEC countries, Libya and Nigeria are not participating in the production cut agreement, and production in both of these countries has risen. Algeria is a participant in the agreement, but it has not complied with its pledged cutsâ&#x20AC;&#x201D;nor has Gabon. Only Angola has met its pledge. Of the two Latin American OPEC countries, Ecuador has not fully complied with its pledged cuts. Venezuela has complied, but for different reasons; the country is mired in turmoil. *All monetary references are in U.S. dollars

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FUELS & SUPPLY

Arabian Peninsula Oil and Gas Production All of the Arabian Peninsula countries possess oil and natural gas resources, although the production levels differ greatly. The largest producers of petroleum are Saudi Arabia, Iraq, the UAE and Kuwait. The largest producers of natural gas are Qatar, Saudi Arabia and the UAE. These countries are all members of OPEC. Oman is not a member of OPEC, but it produces a respectable volume of oil and gas. Bahrain produces a small volume of oil and gas, with more emphasis on natural gas development. Yemen produces only a small amount of oil and gas, and its output has dwindled significantly in recent years, partly because of internal unrest.

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BP lists Saudi Arabia as having the second-largest oil reserves base in the world at 266.5 billion barrels, following Venezuela with 300.9 billion barrels.

BP lists Saudi Arabia as having the second-largest oil reserves base in the world at 266.5 billion barrels, following Venezuela with 300.9 billion barrels. The ups and downs in Saudi Arabian oil production have often come about as market-balancing measures, with Saudi Arabia using its massive production capacity to moderate prices. However, in recent years, this strategy started to constrain Saudi output. Eventually, the loss of market share prompted Saudi Arabia to back away from its role as swing producer.

Figure 1 presents the long-term trend in Arabian Peninsula oil production from 1965 – 2016, as published by BP. The oil price shocks of the 1970s caused production to plummet, with production dropping from a peak of 18.6 million barrels per day (MMbpd) in 1979 to 8.2 MMbpd in 1985. Thereafter, prices collapsed and demand began to grow. Arabian Peninsula crude production has more than tripled since 1985, growing from approximately 8.2 MMbpd in 1985 to nearly 27 MMbpd in 2016. As the figure illustrates, the upward trend has been punctuated with dramatic ups and downs attributed to political turmoil and market forces. For example, Kuwaiti production was brought nearly to a standstill during the Iraqi invasion of 1991. Iraqi production also dropped sharply. It remained shackled during the extended Iran-Iraq War, and dove again during the Iraq War that began in 2003 with the invasion of the U.S.-led coalition, toppling the government of Saddam Hussein.

Figure 2 shows the trend in natural gas production among the Arabian Peninsula countries. Qatar is far and away the leader in natural gas production. BP lists Qatar as having 858.1 trillion cubic feet (Tcf) of natural gas reserves—the third-largest reserves base in the world. Only Iran and Russia have larger proven reserves. Within the Arabian Peninsula, Saudi Arabia is the second-largest producer of natural gas, and the UAE is the third-largest. These three countries account for 83% of total Arabian Peninsula natural gas production.

Figure 2 Arabian Peninsula Natural Gas Production, MTOE

Figure 1 Arabian Peninsula Oil Production, bpd

Source: BP

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Source: BP

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FUELS & SUPPLY

Oil Market Rebalancing and the Arabian Peninsula

The Arabian Peninsula and the Current Global Oil Imbalance a peak of 9,627 kbpd in April 2015. It fell to 8,567 kbpd in September 2016. The latest data shows that it has risen back above 9,300 kbpd.

Figure 3 U.S. Active Oil and Gas Rigs Drop, Then Begin Recovery

Ending the Oil Price War

One of the most difficult issues now facing the global oil industry is chronic oversupply. Global oil stockpiles are at record high levels, and this is weighing on prices. Although many would argue that low oil prices are good for consumers, low prices are also stifling energy investments. Investment has suffered not only in oil, but also in alternative and renewable energy sources. In the longer term, this could backfire to create another shortfall and price spike. The oil producing countries in the Arabian Peninsula are at the center of this issue. Indeed, Saudi Arabia was the key force behind the oil price war that drove prices down from late 2014 onward. Saudi Arabia often shouldered the burden of adjusting its production up to prevent price spikes, and down to prevent price collapses. This became an increasingly thankless job over the past decade, as the U.S. shale boom added more and more oil to the market and reduced U.S. import requirements. Saudi Arabia decided to drive the higher-cost producers out of the market so it could preserve market share.

Source: Baker Hughes

The oil price war also took a heavy toll on the OPEC producers, and many could not continue comfortably because a major portion of their government revenues derive from oil. As Figure 4 illustrates, each of the Arab Peninsula OPEC members lost net oil income revenue between 2015 and 2016. Saudi Arabian net oil export revenues fell from $157 billion in 2015 to $133 billion in 2016. Qatarâ&#x20AC;&#x2122;s revenues fell from $30 billion in 2015 to $24 billion in 2016. In total, the five Arabian Peninsula OPEC members lost $49 billion in oil export revenues between 2015 and 2016.

Figure 4 Drop in Net Oil Export Revenues,

Saudi Arabia began to ramp up its crude production. Saudi production averaged 9,584 thousand barrels per day (kbpd) in 2013, and it rose to 10,123 kbpd in 2015. Prices began to fall. In October 2014, WTI crude spot prices averaged $84.40/b and UK Brent spot prices averaged $87.43/b. In January 2015, WTI spot prices dropped to $47.22/b and Brent prices dropped to $47.76/b.

Billion US$, Arabian Peninsula OPEC

The oil price war was successful in part. It shut in a large percentage of the U.S. shale industry, which was rapidly expanding. The number of active oil and gas rigs in the United States soared to over 1,900 by late 2014. After Saudi Arabia boosted production and prices fell, the U.S. active rig count began to fall, dropping below 1,000 in April 2015. Figure 3 displays the U.S. active rig count, as published by Baker Hughes. Drilling rigs continued to exit the field until the rig count hit bottom at 404 in May 2016. However, as the figure shows, the rig count has been increasing since then, and it stood at 952 as of the first week of July 2017. U.S. crude production hit FMNMagazine

Source: U.S. Energy Information Administration (EIA)

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Oil Market Rebalancing and the Arabian Peninsula

A number of key producers, led by Saudi Arabia and other OPEC members, decided that the oil price war should be ended and that supply should be tightened so prices would begin to rise. This became more crucial once sanctions were lifted on Iran in early 2016. When Iranian crude re-entered the market, crude prices dropped below $30/b for a time. Iran stated its determination to restore crude production to its pre-sanctions levels of 4 MMbpd, regardless of the impact on prices.

OPEC-non-OPEC Production Cut Agreement, November – December 2016

The global oil market found it difficult to believe that OPEC would be able to sign a firm agreement to cut oil production. Indeed, some market commentators felt that the accord was mainly theater, designed to keep interest high and support prices. Some called it “verbal intervention,” observing that the news conferences and press releases always seemed to set off a price rally. At best, some thought that the November 30 OPEC meeting would be another series of discussions without any real action.

Qatari Minister of Energy and Industry Mohammed Saleh al-Sada attends a news conference following the meeting on April 17.

Doha Meeting, April 2016

OPEC surprised the world with the resounding success of the agreement. The 11 participating OPEC countries then went further by gaining support from 11 non-OPEC countries. The cuts were scheduled to begin in January 2017, and they were to last for six months. The agreement was to be renewable for another six months if necessary. The goal was to reduce the supply glut, draw down some of the massive global stockpiles and firm up prices.

Saudi Arabia, Qatar, Russia and Venezuela were the first to broach the idea of setting a freeze on crude production levels. These four countries made a preliminary deal in February 2016 and began to seek additional participants. A meeting was scheduled for April 15 in Doha, the capital of Qatar. Other key producers in attendance included Algeria, Angola, Azerbaijan, Colombia, Ecuador, Indonesia, Iran, Iraq, Kazakhstan, Kuwait, Mexico, Nigeria, Oman and the UAE. Within OPEC, Libya was the only country that did not participate. Iran participated in the discussions, but held to its position that it would continue to restore output. Iran and Saudi Arabia were at an impasse on this issue. The meeting ended without an agreement.

At the time, many experts believed that a six-month agreement would be sufficient. Crude prices strengthened immediately, with WTI crude futures prices in December 2016 finally hitting the $50/b mark. Earlier in the year, numerous forecasts had predicted $50-barrel crude by the end of 2016, but this price never arrived until OPEC made its production cut agreement.

Algiers Accord, September 2016

Although the Doha meeting ended without an agreement, the parties continued to discuss ideas about production caps and freezes. Some of the smaller producers pushed for action, as well as some non-OPEC producers; Saudi Arabia concurred.

The pact first established baseline production levels, then assigned planned output to take effect January 2017. The output target was 32.5 MMbpd. Per OPEC’s internal calculations, this amounted to a cut of 1.256 MMbpd from the baseline levels.

The producers decided to meet again in September 2016. This meeting achieved a consensus decision to create a plan and work jointly to restore oil market stability. The agreement became known as OPEC’s Algiers Accord. All OPEC member countries attended the meeting. Other attendees included Azerbaijan, Brazil, Kazakhstan, Mexico, Oman and the Russian Federation.

The agreement also called for 0.6 MMbpd of cuts from nonOPEC countries, to be led by Russia, which pledged to cut 0.3 MMbpd. Saudi Arabia agreed to make the largest cut at 486 kbpd. Iraq was to follow with a cut of 210 kbpd. Initially, Iraq demurred from participating in the cuts, using the rationale that it needed oil export funds for its war on terrorists. After extensive negotiation, Iraq relented and agreed to cut 210 kbpd.

OPEC’s Algiers Accord set plans in motion to develop a firm plan to be discussed at the official OPEC meeting scheduled for the end of November. FMNMagazine

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FUELS & SUPPLY

Historically, compliance was a matter of self-policing and self-discipline. OPEC used to set country-specific production quotas, but the quotas were often exceeded, and in fact worked against the group’s best interest at times. OPEC shifted to a production ceiling approach instead.

Compliance with the Production Cuts, January – June 2017

Once the agreement was finalized, the focus shifted to the matter of compliance. A monitoring committee was established, which included the ministers from Algeria, Kuwait, Venezuela and two participating nonOPEC countries: Russia and Oman. The purpose was “to closely monitor the implementation of and compliance with” the agreement. Historically, compliance was a matter of self-policing and self-discipline. OPEC used to set country-specific production quotas, but the quotas were often exceeded, and in fact worked against the group’s best interest at times. OPEC shifted to a production ceiling approach instead. The fact that OPEC exceeded production quotas and ceilings in the past led to a solid amount of market skepticism about the most recent production cuts. Some market analysts like to use the term “cheating” when discussing quota levels. However, it is not a simple matter to be precise when measuring the production, transport, storage and sale of oil over time. Moreover, compliance difficulties are not limited to OPEC members. For example, Russia has made numerous agreements with OPEC, and it has frequently failed to honor them.

Oil Market Rebalancing and the Arabian Peninsula The following table presents a more detailed look at OPEC’s production agreement, based on the officially adopted baseline production levels. OPEC has recently released its Monthly Oil Market Report (MOMR) for July, which includes production levels in June 2017. This makes it possible to assess how the production cut agreement fared during the first six months of 2017, which was the agreement’s initial duration.

OPEC Production Cut Agreement: January 2017 Planned, and Actual January and June 2017 January 2017 Planned

Member

Planned Adjustment*

Actual Output (OPEC MOMR)

January 2017 June 2017 Output June 2017 Relative to Plan (OPEC MOMR) Relative to Plan

Algeria

1,039

-50

1,045

1,060

Angola

1,673

-80

1,651

-22

1,668

-5

522

-26

527

Ecuador

193

-9

199

197

Iran

3,797

3,775

-22

3,790

-7

Iraq

4,351

-210

4,476

125

4,502

151

Kuwait

2,707

-131

2,718

2,709

Gabon

618

-30

618

10,508

-486

9,946

-562

9,950

-558

UAE

2,874

-139

2,931

2,898

Venezuela

1,972

-95

2,004

1,938

-34

Participating OPEC 11 30,254

-1,256

29,890

-364

29,857

-397

Qatar Saudi Arabia

Increase January – June

Non-Participating OPEC (Exempted because of internal unrest) Libya Nigeria Total OPEC Output Notes: Adjustment is based on OPEC's adopted baseline of production. Iran negotiated an increase because of prior sanctions. Excludes Equatorial Guinea, which joined OPEC in May 2017.

675

825

150

1,576

1,733

157

32,141

32,415

274

Source: Organization of the Petroleum Exporting Countries (OPEC)

The starting baseline for the 11 OPEC participants was 30,254 kbpd. Iran negotiated an increase of 90 kbpd as a condition of its participation. The others agreed to the cuts listed. Saudi Arabia’s pledged cut was the largest at 486 kbpd. Iraq followed with 210 kbpd, and the UAE pledged the third-largest cut at 139 kbpd. The total planned cut was 1,256 kbpd in January 2017. Now that OPEC has published the July edition of MOMR, the January – June production data can be compared to the plan. According to OPEC, January production for the 11 participants was 29,890 kbpd. This was 364 kbpd below what had been pledged. At the country level, Algeria, Ecuador, Gabon, Iraq, Kuwait, the UAE and Venezuela were not yet in compliance. However, Angola, Iran and Saudi Arabia produced less than their pledged amounts, bringing the total even lower than planned. Adding Libya’s and Nigeria’s production brought the January total to 32,141 kbpd. In November 2016, when OPEC made its agreement, production was 33,306 kbpd. Using these two figures, OPEC cut 1,165 kbpd between November 2016 and January 2017. Because the pledged adjustment was 1,256 kbpd, the cuts in January 2017 amounted to 92.8% compliance. However, the high compliance rate was made possible mainly because Saudi Arabia went further with its cuts than required. Taking this extra responsibility gave the agreement credibility. Moreover, Iran unexpectedly contributed to the cuts by not raising its production by the 90 kbpd it had negotiated. Other participants achieved higher rates of compliance than FMNMagazine

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Oil Market Rebalancing and the Arabian Peninsula

the market predicted. In June 2017, the OPEC participants cut production to 29,857 kbpd, which was 397 kbpd below the target. The Arabian Peninsula has achieved high compliance rates. The following chart series compares the targeted production level with the January – June actual production data for the five Arabian Peninsula participants. Figure 5 compares Iraq’s production with its target of 4,350 kbpd. Iraq was reducing its production toward the target during the January – April period, but started moving in the wrong direction by increasing its production in May and June. In June, Iraq’s production of 4,502 kbpd was 151 kbpd above its pledged production level. For the first half of 2017, Iraqi compliance was 98%.

Qatar also began the year with aggressive production cuts, as shown in Figure 7. Qatar’s allotted volume was 618 kbpd. The country cut production from 623 kbpd in January to 592 kbpd in February. Thereafter, production has been maintained close to the pledged amount. Qatar’s compliance rate of 100.9% has surpassed requirements.

Figure 7 Qatar Compliance with Production Cuts = 100.9%

Figure 5 Iraq Compliance with Production Cuts = 98%

Source: Organization of the Petroleum Exporting Countries (OPEC)

Figure 6 compares Kuwait’s production with its target of 2,707 kbpd. Kuwait rapidly undertook its production cuts, reducing production from 2,718 kbpd in January to 2,702 kbpd in March. Thereafter, production has hewn closely to the pledged amount. For the first half of 2017, Kuwaiti compliance was 99.9%.

Figure 6 Kuwait Compliance with Production Cuts = 99.9%

Source: Organization of the Petroleum Exporting Countries (OPEC)

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Oil Market Rebalancing and the Arabian Peninsula

Saudi Arabia has been the linchpin in the production cut agreement. As shown in Figure 8, the country immediately cut crude production below its pledged amount of 10,508 kbpd, cutting production to an average of 9,865 kbpd in January. This was an overwhelming 643 kbpd below its pledge. Saudi Arabia has held its production approximately 550 â&#x20AC;&#x201C; 600 kbpd below the target for the first six months of the year, yielding a compliance rate of 106%.

Figure 8 Saudi Arabia Compliance with Production Cuts = 106%

Source: Organization of the Petroleum Exporting Countries (OPEC)

Figure 9 compares UAE crude production with its pledged volume of 2,874 kbpd. The UAE began the year with a January output level of 2,962 kbpd, 88 kbpd above the pledged volume. Production was reduced significantly over the next two months. It then plateaued at approximately 2,900 kbpd, slightly above its allotment. During the first six months of 2017, UAE production averaged 2,917 kbpd, equating to a 98.5% compliance rate.

Figure 9 UAE Compliance with Production Cuts = 98.5%

Source: Organization of the Petroleum Exporting Countries (OPEC)

As a whole, the Arabian Peninsula members were immediately in compliance with the OPEC production cut agreement that took effect in January, and they have remained steadily below their quota each month since. Their compliance rate was 102.3% during the first six months of 2017. FMNMagazine

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Oil Market Rebalancing and the Arabian Peninsula

The Future: The Six-Month Production Cut Is Extended by Nine Months Despite high compliance rates, the global oil market remains in a state of oversupply. A key goal of the cuts was to reduce global oil inventory levels to within five-year average levels, but stockpile levels have remained stubbornly high. In fact, the first quarter of 2017 brought an increase of 41 million barrels (MMbbl) of oil to stocks held by members of the Organization for Economic Co-operation and Development (OECD). In May 2017, the OPEC and non-OPEC participants decided to extend the production cut agreement by nine months, rather than the six months initially set out in the original agreement. This will now carry the production cuts through the first quarter of 2018.

“”

Despite high compliance rates, the global oil market remains in a state of oversupply. A key goal of the cuts was to reduce global oil inventory levels to within five-year average levels, but stockpile levels have remained stubbornly high.

Although this was yet another noteworthy example of consensus building within the diverse grouping of participants, the market reaction was one of disappointment. Oil prices promptly declined, and they have not regained and consistently occupied the territory above $50/b.

Conclusion: The End of the Price War Leaves a Lasting Oversupply The Arabian Peninsula countries play a major role in the global oil market. They possess massive oil and gas reserves, and they account for a large share of global oil production. They are centers of rapidly growing domestic demand and refinery activity. Now, they are finding themselves playing a larger role politically and diplomatically in the current efforts to stabilize the global oil market. They have been successful in reaching consensus on the production cuts, even though their diplomatic relations may be strained on other matters.

underway, and that only patience will be required. Most of the countries believe that they have already accepted a large enough share of responsibility for the global market. The cuts they have made supported higher prices, but the higher prices in turn have stimulated production increases in other countries. The OPEC-non-OPEC producers are understandably reluctant to see this continue. n Note: This article contains material that will also appear in the International Journal of Hydrocarbon Engineering.

The effectiveness of the OPEC-non-OPEC cuts has been undermined by expansion of production in other areas, notably the United States and the non-participating OPEC countries, Libya and Nigeria. Libya’s crude output rose from 675 kbpd in January to 825 kbpd in June, an increase of 150 kbpd. Nigeria increased its crude production from 1,576 kbpd in January to 1,733 kbpd in June, an increase of 157 kbpd.

Dr. Nancy Yamaguchi

During the first half of 2017, U.S. crude production climbed by 392 kbpd, according to the weekly supply data published by the U.S Energy Information Administration (EIA). Therefore, these three countries added nearly 700 kbpd of oil to the market during the first half of 2017, severely undercutting the effectiveness of the OPEC-non-OPEC agreement to cut output by 1,256 kbpd.

Nancy is an author and petroleum industry expert specializing in the advanced analysis of energy markets. Dr. Yamaguchi is the Senior Markets Analyst for EPIC News+Data and the President of Trans-Energy Research Associates, where she focuses on a wide spectrum of fuel-related issues such as economics and the environment. She possesses a strong interest in global oil industry, including supply, demand and trading trends, as well as transport, refining, product blending, alternative and reformulated fuels, product quality and price behavior. Dr. Yamaguchi can be reached at NYamaguchi@Trans-Energy.com.

Some analysts have calculated that the oil supply overhang will persist into next year, unless the OPEC-non-OPEC countries agree to cut production even further. But the OPEC-non-OPEC participants remain of the opinion that market rebalancing is FMNMagazine

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The LCFS matters beyond the borders of the Golden State. One reason is the sheer size of the California economy. It’s an oftcited statistic that if the state were a country, it would have the sixth-highest gross domestic product (GDP) in the world. Another reason is that while “LCFS” has become shorthand for California’s program, it’s not the only place with emission-cutting regulations. Oregon recently implemented a lowcarbon fuel standard that is similar to California’s—a 10% reduction in the carbon intensity of transportation fuels over 10 years. As in California, biodiesel has lower carbon intensity scores and is a key fuel in helping regulated parties meet their obligations. In Canada, the province of British Columbia has a low-carbon policy. Additionally, Canada is considering a national standard. “Over time, these LCFS programs will build an integrated West Coast market for low-carbon fuels that will create greater market pull, increased confidence for investors of low-carbon alternative fuels, and synergistic implementation and enforcement programs,” CARB says on its website. “There is a distinct growth trend with respect to low-carbon policies,” explained Shelby Neal, Director of State Governmental Affairs at NBB. “A lot of people are tired of being dependent on fossil fuels, and they want cleaner fuels and cleaner air. Carbon policies have become a proven way of accomplishing those goals.” FMNMagazine

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Renewable Energy Group, Inc. (REG) is a leading provider of cleaner, lower carbon intensity products and services. REG is an international producer of biomass-based diesel, a developer of renewable chemicals and North America’s largest producer of advanced biofuel. REG utilizes an integrated procurement, distribution and logistics network to convert natural fats, oils, greases and sugars into lower carbon intensity products. With 14 active biorefineries, a feedstock processing facility, research and development capabilities and a diverse and growing intellectual property portfolio, REG is committed to being a long-term leader in bio-based fuel and chemicals.

Despite the uptick in gasoline prices, American

drivers remain optimistic about the current state of the economy. Three in five (60%) drivers say they are optimistic about the economy, the same proportion that said so last month in July 2017, and 16 points higher than last August when optimism stood at 44%. There are strong demographic variations in optimism: 64% of those age 50 or higher say they are optimistic, compared to 54% of those ages 18 â&#x20AC;&#x201C; 34. Source: NACS Consumer Fuels Survey, August 2017

Bottom Line:

While the current administration and its focus on jobs and growth seems to be driving some of this optimism according to various sources, itâ&#x20AC;&#x2122;s also likely that consumers are starting to realize that the supply boom from domestic oil fracking is real, and here to stay. READ MORE

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RETAIL OPERATIONS

Regulations and

Retailer Growth:

A PIVOTAL BALANCING ACT by Joe O’Brien

RENEWABLE FUELS FUEL ECONOMY

Over the past 30 years, the

fuels industry has oscillated between periods of regulation and deregulation. With the Trump administration in office, it appears that reducing regulatory requirements—from environmental compliance to banking reform—is the order of the day.

How will this shift affect traditional petroleum handling and distribution channels? In some cases, it could reduce expenses; but in other cases, it may remove the impetus for development in an industry beginning to transform. Let’s explore some of the issues on the table.

Renewable Fuels OZONE STANDARDS

UNDERGROUND STORAGE TANKS Although the Renewable Fuel Standard (RFS) has been shadowed by criticism of its administration, it has been the single greatest market driver for the development and distribution of low-carbon fuels. Since 2006, ethanol production increased over 200% and biodiesel production increased over 400%. The RFS has also helped open the door for the adoption of higher biofuel blends such as E15. That said, distribution of E15 has been restricted by current Reid vapor pressure (RVP) regulations that prevent it from being widely sold during the summer. FMNMagazine

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The RFS (in its current form) expires in 2022. Beginning in 2023, the U.S. Environmental Protection Agency (EPA) administrator will set the Renewable Volume Obligations (RVO). It is difficult to speculate which direction the EPA administrator will take the RVOs, but it’s clear that many retailers have been planning for a future where biofuels become a much bigger part of the fueling landscape. If the EPA maintains or reduces the RVOs, biofuel consumption could plateau or diminish. Alternately, the Consumer and Fuel Retailer Choice Act (a bill proposed earlier this year to amend the Clean Air Act) could relax the regulation that prevents the sale of E15 at most stations during the summer. Both the EPA’s posture toward RVOs and legislators’ response to the proposed RVP waiver for E15 will provide a clear signal to retailers if a growing or contracting biofuels market is on the horizon.

Fuel Economy

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Regulations and Retailer Growth: A Pivotal Balancing Act

Adoption of electric and hybrid vehicles is not yet widespread in the United States. If efforts to improve fuel economy abate across the vehicle fleet and if fuel prices remain relatively steady, it might lead to increased fuel consumption. In addition, under current regulations, automakers will no longer earn credit for meeting CAFE standards by producing flex-fuel vehicles (FFV) beginning in 2019. This could lead to fewer FFVs, and therefore diminish demand for E85. Meanwhile, sales of SUVs and light-duty trucks are up about 25% over the past three years.

“

The collective mindset in the U.S. appears to be headed toward accepting the midsize SUV as the standard vehicle of choice, with some expectation of reasonable gas mileage. Automakers’ decisions regarding which vehicles to build will be a leading indicator of fuel consumption in the next few years.

The new regulations require light-duty vehicles to achieve 54.5 miles per gallon by 2025 and heavy- and medium-duty trucks to reduce emissions through the adoption of new technologies by 2027. The CAFE standards contributed to the development and marketing of electric and hybrid vehicles, and to automotive technologies that improved fuel economy and reduced emissions.

”

Proposed EPA budget cuts could reduce funding available for future grants that clean up abandoned USTs. These funding cuts could shift this UST responsibility back to states and local entities.

Underground Storage Tanks Congress originally passed the Corporate Average Fuel Economy (CAFE) standards to help mitigate the oil crisis in the 1970s. The standards caused fuel economy to increase steadily until the 1990s. Fuel economy standards remained unchanged until the Obama administration, spurred by the threat of climate change and greenhouse gas emissions, accelerated the standards.

”

In the 1980s, federal regulations began to transform the storage of petroleum and hazardous chemicals in underground storage tanks (UST). These regulations have led to improved tank construction, leak detection and monitoring equipment, compliance monitoring and mediation services. The compliance sector grew substantially because of the regulations, but the requirements also produced a lengthy list of procedures and expenses for fuel site operators. At this time, the 2015 UST amendments remain in effect, and retail fueling sites must show compliance—or intended compliance—to the amendments by 2018. However, proposed EPA budget cuts could reduce funding available for future grants that clean up abandoned USTs. These funding cuts could shift this UST responsibility back to states and local entities. If these budget reductions are an indication of future government-led compliance initiatives, then fuel sites, equipment suppliers, technicians and compliance service providers could be looking at a pause in compliance advancement and a shrinking market for those who offer compliance solutions and services. However, with fewer compliance requirements to manage, fuel sites may experience a reduction in compliance expenses that would yield capital for other operational improvements. FMNMagazine

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Regulations and Retailer Growth: A Pivotal Balancing Act

Relaxed ozone standards could give stations some breathing room by lowering compliance equipment expenses. Money and attention could then be channeled to other areas of their operations.

Ozone Standards

U.S. environmental regulations really took root with the passage of the Clean Water Act and the Clean Air Act of 1972, which gave the EPA power to set National Ambient Air Quality Standards (NAAQS). These standards regulate the allowable amount of harmful air pollutants. In 2015, the NAAQS were lowered from 75 parts per billion (ppb) to 70 ppb. More stringent ground-level ozone standards have been widely criticized. The National Association of Convenience Stores (NACS) stated that the new standards could prompt states to require reformulated gasoline in more stations, impose lower RVP requirements and possibly retain Stage II recovery requirements.

A bill was introduced earlier this year to postpone the deadline for revising the ozone standards until 2025. Relaxed ozone standards could give stations some breathing room by lowering compliance equipment expenses. Money and attention could then be channeled to other areas of their operations.

Regulatory Balance

The conventional wisdom suggests that fewer regulations will lead to economic growth overall, with small, independent operations experiencing particular relief— and there is evidence to support this theory. For example, in areas where the regulations on Stage II vapor recovery at the station have been removed, marketers have benefited from equipment and maintenance cost savings. FMNMagazine

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”

Ultimately, it’s unlikely that members of the petroleum marketing industry will come out winners in all instances. For example, some states will continue to enforce compliance standards that are more stringent than their federal equivalents. But if legislators and the administration support policies that lead to a productive mix of regulations—few enough to spur entrepreneurship and reduce compliance costs, but just enough to protect our resources—then we could be headed toward an economic climate that supports growth at the retail level. n

Joe O’Brien Joe is Vice President of Marketing at Source™ North America Corporation. He has more than 20 years of experience in the petroleum equipment fueling industry. Contact him at JObrien@SourceNA.com.

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VENDOR VIEWPOINT:

by Ed Kammerer

Ready or Not: How to Eﬃciently Address the 2018 UST Regulations

In the world of retail fueling, when the rumors begin swirling that regulatory changes are being considered and may even be imminent, a fueling site operator has two choices in how to react: they can either be proactive or reactive. The proactive retailer will conduct research on the potential new regulations, consult with their manufacturer or distributor, draw a few educated conclusions and then decide whether or not an equipment or site design upgrade should be addressed before the regulations go into effect. The reactive retailer will be aware of the impending new legislation, but will hold off on making any changes to the fueling system—and incurring the cost—until the new regulations are written in stone

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and a comply-by date has been established and communicated. Both approaches have their benefits, but either way, one thing is certain: change is coming and retailers must ultimately comply. One of the more recent proactive-or-reactive regulatory conundrums arose in July 2015 when the U.S. Environmental Protection Agency (EPA) finalized new regulations regarding the inspection, testing and maintenance of underground storage tank (UST) systems.

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Now, it comes down to one date that all retail fueling site operators in the U.S. must be intimately aware of: October 13, 2018. That’s when their locations must be in compliance with the new EPA regulations and have begun their inspections and testing, or have developed written proposals that illustrate how they intend to meet the tenets of the new regulations.

“

The following summarizes the new regulations that will govern retail fueling sites as of the compliance deadline, according to the EPA: • Sumps and under-dispenser containment systems must be tested every three years if the system uses interstitial monitoring as the primary form of leak deterrence in its piping system.

”

• Spill bucket testing will be required every three years, unless the UST system is outfitted with double-wall spill buckets and the interstitial space is tested on a regular basis. Some states, such as California and Maryland, already meet this new regulation because they require spill bucket testing every year.

While the fuel retailer can choose whether to be proactive or reactive when confronted with new regulations, one thing is certain regardless of the approach: new regulations require changes at the fueling site that will need to be satisfied at some point, because refusing to comply will result in severe fines or, in a worst-case scenario, site shutdown.

• Overfill prevention equipment inspections will need to be completed every three years, except in states like Mississippi, where they are already required annually. • Whenever any component in the spill protection, overfill containment and secondary containment areas of the UST system needs to be repaired, compliance testing of the repaired system must be completed within 30 days, regardless of whether or not an actual product release occurred. The designers and manufacturers of UST systems and their components know the stress that can be placed on retailers whenever new regulations come into force, as well as the tension that can build just from having to meet the demands of operating a safe, in-compliance fueling site on a day-to-day basis. As such, they have responded with a number of fueling system innovations that have been designed to optimize daily fuel site performance and the ability to meet the new testing and inspection guidelines: • Spill Containers: Next-generation spill containers have been designed so that any damaged or compromised units can be quickly repaired without needing to disrupt the forecourt to access them. They are fully grade accessible and replaceable with no need to employ jackhammers or heavy equipment to break concrete and, subsequently, there’s no need to refill with concrete.

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Ready or Not: How to Efficiently Address the 2018 UST Regulations

• Double-Wall Spill Containers: These spill containers make it easier and more cost-effective to satisfy the new EPA regulations because they can be inspected by testing the interstitial space between the two walls of the container to ensure that no product leaks have occurred. The double-wall design allows operators to utilize vacuum testing instead of hydrostatic testing. Hydro tests produce contaminated water that must be disposed of properly, which is costly. Not only is vacuum testing simpler and less expensive than hydro testing, it also shortens the test cycle—what used to be an hour-long testing process becomes a five-minute operation. • Overfill Prevention Valves: Traditional overfill valves had to be pulled out of the tank to be inspected, but newly developed technology allows the valve to remain in the tank during inspection. This lowers the time and cost of the inspection process, while also eliminating the need to deconstruct the system to remove the valve from the tank. • Sump Entry Fittings: Next-generation entry fittings create a positive and secure seal when in contact with the sump wall. These new entry fittings are no longer made of rubber-based materials that can break down over time and cause leak points. They are constructed of rigid composite materials that will last the lifetime of the piping and containment sumps. In addition, most dispenser sump designs now feature a conduitless fitting option that enables the conduit to run along the side of the sump, which removes a common water intrusion point. Retailers who choose to incorporate any or all of these innovations into their fueling systems, whether proactively or reactively, must also be aware of another component of the new EPA regulations: the ABC Operator Program. This program has been created and designed by the EPA to ensure that all employees at a retail fueling site have at least some level of training on how to operate and administer the site’s UST storage and dispensing system.

Based on the level of training that has been performed, employees will be approved for one of three certification levels: • Class A will include employees who can responsibly and competently operate and maintain the UST system, manage resources and personnel, and make proper decisions in relation to the site’s level of regulatory compliance. • Class B will include employees who can perform daily responsibilities related to the operation and maintenance of on-site UST systems, with a deep understanding of the system’s operation and maintenance. • Class C will include employees who are typically first responders to events that may be emergency conditions, including alarms that are triggered by spills or releases from the UST system. While the fuel retailer can choose whether to be proactive or reactive when confronted with new regulations, one thing is certain regardless of the approach: new regulations require changes at the fueling site that will need to be satisfied at some point, because refusing to comply will result in severe fines or, in a worst-case scenario, site shutdown. The days of simply installing a piece of equipment that has been mandated by the EPA are over. This equipment will now need to be inspected and tested over the life of the product. With that in mind, outfitting a fueling site with the best UST equipment and systems available is always a good solution for optimal efficiency. The manufacturers of these critical components have responded with an impressive list of next-generation solutions that take the performance of spill containers, overfill prevention valves, multiports and entry fittings to an advanced level of cost-effectiveness, reliability and safety. Beyond regulatory compliance, these upgrades ultimately benefit the site operator, their customers and the environment. n

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Ed Kammerer Ed is the Director of Global Product Management for OPW, based in Cincinnati, Ohio. He can be reached at Ed.Kammerer@OPWGlobal.com. OPW is leading the way in fueling solutions and innovations worldwide. OPW delivers product excellence and the most comprehensive line of fueling equipment and services to retail and commercial fueling operations around the globe. For more information about OPW, visit www.OPWGlobal.com. FMNMagazine

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Three Strategies to Increase Profits

Adding or upgrading a car wash at any facility can boost

your bottom line. With up to 80% of each car wash sales dollar representing gross profit, a car wash can be one of the most successful investments in the market today. Of course equipment is important, but these three strategies separate you from the competition and help ensure that you exceed your business goals with a car wash system. FMNMagazine

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with a Car Wash VENDOR VIEWPOINT: by David Dougherty

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Partner with a Trusted Distributor

Technological advances have made friction and touchless systems more reliable and efficient than ever before. However, a working relationship with a distributor isn’t an exact science.

develop a long-standing relationship to continually be a partner in growing your business. Some of the areas where you’ll be able to tap into the distributor’s knowledge include:

From the exploratory phase, a distributor should be trusted as an ally for anything and everything. Successful car wash operators are the ones who have built strong relationships with their local distributors.

• Assisting in site evaluations to help select the best wash and options for your site • Delivering the vehicle wash system with the highest return on investment (ROI)

Much more than sales agents, these distributors act as your local expert and can provide valuable information regarding your local market, potential customers and your competition, as well as guide you through the process to make sure your business meets its full potential right away.

A strong relationship with your distributor doesn’t end once the wash system is installed—it’s only just begun. They also provide additional revenue-generating equipment, factory-certified technical service, repair parts and can assist in maximizing your wash and revenue potential. Each distributor’s goal is to

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• Identifying environmentally efficient solutions • Providing installation, preventative maintenance and emergency service • Determining a customized ROI calculator that will determine the average number of car washes per gallons of gas sold

Distributors help optimize a car wash by adding an around-the-clock profit center and enhancing the experience for your customers.

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Optimize Your Car Wash Site

Market Your Car Wash with a Unique Mix of Tactics

Three Strategies to Increase Profits with a Car Wash

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RETAIL OPERATIONS

Location is critical to the success of any car wash. When selecting your car wash location, your distributor will help you navigate all the considerations, including traffic count/directional purpose, neighborhood characteristics, population size and competition. After site selection, construction and installation, maintaining a car wash becomes a key strategy for continued growth. A car wash adds convenience for any customer, and an owner is responsible for keeping the car wash clean, safe and operational.

So, you’ve worked with your distributor to build the perfect car wash facility. Now it’s time to drive traffic to your site. Through a mix of marketing strategies, you can stay top-of-mind with existing customers and connect with potential new customers. First and foremost, make a splash with a grand opening event. This promotion will allow you to leverage your new car wash before, during and after the launch. Here are a few ideas to help boost the exposure of your special event. • The Final Countdown: Feature a countdown on your facility until the grand opening event; it will serve as a constant reminder to all who drive by. This could be a digital display or a large banner.

In addition to a clean car, customers like a clean facility. At least one employee at the facility, or in an area, should be responsible for maintaining a clean site and taking care of sweeping, trash removal and overall cleanliness. A clean site projects success and has a significant impact on repeat and potential customers.

• Grand Prize Raffle: Host a grand prize raffle where one winner will receive free car washes for a year. Require all entrants to provide their email addresses so you can build your e-newsletter database and continue to share updates with them.

Customers also require a safe experience, especially with around-the-clock hours. A well-lit facility is crucial, and lights should be replaced at regular intervals. Clear signage also contributes to a safe and inviting atmosphere.

• Give Back to the Community: Partner with a local charity for the grand opening event. A portion of the day’s total proceeds will go directly to the organization. This will generate positive public relations and give a large group of people an incentive to promote your event. It’s a win-win for everyone involved!

Last but not least, your facility should offer added conveniences for customers and additional alternative revenue sources for you. Think about adding vacuums, vending machines and cash machines to your facility.

Some of the most effective marketing efforts can be done on-site. Take advantage of customers that are already at your location by reinforcing their choices and encouraging repeat visits. • Loyalty Program: Create a loyalty program to keep customers engaged with special deals and rewards. • Signage: Take advantage of on-site signage to promote your car wash. Large signs on buildings or along the road make for great attention grabbers. • In-Bay Wall Space: Leverage the in-bay car wash wall space by promoting other revenue streams or selling the advertising space to local businesses. You have a customer’s full attention while they’re in the car wash, so make the most of it! • Offer Change Mats and Window Clings: Just a few great ways to remind customers about your car wash as they shop and pay in a c-store.

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David Dougherty Finally, take advantage of the following low-cost opportunities to maximize your exposure in the community. • Fundraisers: This is another opportunity to partner with a local charity and promote car washes. This time, establish a certain day when the organization will receive a portion of the profits. • Social Media: Serve digital ads to your target audiences through social media. For example, feature a happy customer and their clean car on a Facebook ad targeted at people within a 10-mile radius of your location. • Local Media: Local radio and newspapers are cost-effective ways to reach potential customers. You can also work with media outlets to offer on-air prizes in exchange for promotional mentions. Car wash investors across the country are cleaning up by tapping into the $15 billion car wash industry. With a trusted distributor, an optimized site and effective marketing, you can turn a car wash into the highest-margin feature on your property. n

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David owned and operated car washes in the Midwest for over 10 years. Today, he is the Senior Product Manager for in-bay automatics at PDQ Manufacturing, Inc. in De Pere, Wisconsin. PDQ Manufacturing is recognized as the technological leader in vehicle wash systems, providing superior quality, outstanding support and products that contribute to its customers’ profitability. For more information, visit www.PDQInc.com or call 800-227-3373. David can be reached at David.Dougherty@PDQInc.com.

at FuelMarketerNews.com

VENDOR VIEWPOINT: “The only constant is

by Dwight Rutledge

change.” That saying is especially applicable to the fuels industry, where change is a way of life. Everything seems to be in ﬂux, from regulatory requirements and vehicle technology to fueling equipment and even the fuels themselves. Today’s fuel retailers must stay on top of an ever-evolving and increasingly competitive marketplace. One way to drive proﬁts and remain competitive is

Dispenser Filters: It’s Time to Take Them Seriously FMNMagazine

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to put an even higher priority on customer loyalty than ever before. Part of this initiative should be a strong quality assurance program that originates at the pump. Fuel dispenser filters are often overlooked, but they are extremely important contributors to improved customer satisfaction. The basic function of dispenser filters is to prevent a variety of contaminants from being pumped into your customers’ vehicles. When you dispense dirty fuel, the consequences can range from reduced brand loyalty to significant revenue losses resulting from expensive remediation efforts and unplanned downtime. That’s why it’s important for fuel site operators to educate themselves about dispenser filtration. The following sections discuss the three most important points that every fuel marketer should know about dispenser filters.

RETAIL OPERATIONS

Dispenser Filters: It’s Time to Take Them Seriously

How a Dispenser Filter Works

Cellulose media is made from plant ﬁbers that have a rough texture and vary in size and shape. Filters with cellulose media are usually less expensive and more ﬂow restrictive than those that utilize synthetic media.

A fuel dispenser ﬁlter has three primary parts:

Synthetic media is composed of synthetic fibers that create less resistance to flow than cellulose media. Synthetic fibers are smaller, allowing for more filtration capability in the finite amount of space that is available in a filter. Synthetic media’s low-flow resistance and increased surface area achieves higher filtration efficiency.

• The canister is the exterior shell that provides the structure of the filter. • The core is the center tube in the central part of the spin-on filter. • The element comprises the filter media that surrounds the core. Fuel enters the filter, passes through the element where contaminants are absorbed in the media, and exits the filter through the core. The element’s filter media consists of two primary types of media: cellulose (natural) or synthetic. Each media type offers its own unique advantages.

As fuel moves from the storage tank into the dispensing system, it passes through a dispenser filter before it flows through the meter, the hose and the nozzle into a customer’s gas tank. This placement allows the dispenser filter to capture contaminants just before the fuel is pumped into a vehicle, providing fuel site operators with a final opportunity to prevent the distribution of contaminated fuel.

*Epoxy coated shell on select filters **On select Filters FMNMagazine

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RETAIL OPERATIONS

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Dispenser Filters: It’s Time to Take Them Seriously

What Dispenser Filters Do and How They Protect Brand Loyalty

Phase separation sets in when ethanol absorbs water in a storage tank. When the ethanol becomes oversaturated, it can’t stay suspended near the surface of the gasoline and creates a layer of water-saturated ethanol closer to the bottom of the tank. Because this layer is often located close to the storage tank’s pump intake tube, the contaminated ethanol is more likely to be distributed.

Maximizing fuel margins is the top priority for most fuel sites. Buying fuel at the lowest price possible is an obvious method of achieving this goal. Unfortunately, low price points don’t always mean clean fuel. There could be corrosion in the supplier’s storage tanks, low quality control standards at the terminal, dirty delivery tankers—the list goes on.

This type of fuel contamination can seriously damage engines. In some cases, it can cause an immediate mechanical failure that requires towing the vehicle from the station. Sites that pump phase-separated gasoline signiﬁcantly jeopardize their credibility with customers. A dispenser ﬁlter designed to detect and react to phase separation can help preserve customer loyalty.

Particulates and water can damage today’s engine technologies, which are powered by tiny, precision-engineered components. Even the smallest particulates can lead to abrasion and long-term performance problems. In addition, damaging amounts of water can lead to bio-contamination and poor lubricity. Quality dispenser ﬁltration helps protect engine components from these conditions. The presence of water in fuel should be a top concern for any fuel site operator. Phase separation is a condition that occurs when gasoline and alcohol separate in a storage tank due to the presence of water. Last November, the Environmental Protection Agency (EPA) announced that in 2017, reﬁners would be mandated to blend 19 billion gallons of biofuels into the U.S. fuel supply. Most of that quantity will come from corn-based ethanol. FMNMagazine

The corrosive properties of phase-separated fuel can also damage your dispensing equipment. There’s no easy fix for sites that dispense phase-separated fuel. They must shut down their pumps, bring in a vacuum tanker to pump out the tanks, expel the contaminated fuel from the lines by purging them with new fuel and finally dispose of the contaminated fuel. Phase separation can result in a two- to three-day shutdown and thousands of dollars in remediation costs to properly restore the system. Dispenser filters also offer an indication of a fuel system’s overall integrity. For example, if you find debris in the filter FuelMarketerNews.com

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RETAIL OPERATIONS

Dispenser Filters: It’s Time to Take Them Seriously

Frequent ﬁlter clogging is another symptom of trouble—either with the fuel or the tank. In either case, a thorough inspection from a fuel system service company is a prudent course of action.

that looks like coﬀee grounds, corrosion within the storage tank is likely. Frequent ﬁlter clogging is another symptom of trouble—either with the fuel or the tank. In either case, a thorough inspection from a fuel system service company is a prudent course of action.

As the last line of defense against the distribution of contaminated fuel, spin-on dispenser filters provide operators with significant benefits from their relatively small packages. Fuel site managers who maintain a regular dispenser filter maintenance program will protect their dispensing equipment, preserve customer loyalty, bolster their brand image and minimize financial losses resulting from contaminated fuel distribution. As competition in the retail fueling industry continues to grow due to changing market conditions, fuel marketers who prioritize quality assurance will position themselves for future success. n

How to Select the Right Dispenser Filter

Fuel dispenser filters are not “one size fits all.” They are specified for different fuel types and functions, such as filtering particulate, sensing water or alerting operators to phase separation by significantly slowing fuel flow. They are also engineered to capture a certain size of particulate. Filters with lower micron ratings capture more particulate and reach their capacity more quickly as a result. Most fuel dispenser filter manufacturers recommend that fuel site operators use filters with a minimum of a 10-micron rating at their stations to protect customers’ vehicles and their own equipment.

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Dwight Rutledge Dwight is the Business Development Manager at PetroClear, a Champion Laboratories brand dedicated to manufacturing fuel dispenser filters. He has over 35 years of experience in the petroleum equipment industry.

Partnering with a reputable dispenser filter distributor or an experienced, knowledgeable service technician is a recommended course for fuel retailers who want to develop an effective dispenser filter maintenance program for the long term. Here are a few key discussion points to consider during the selection process: • The type of fuel the dispenser filter will handle • The filter’s specific function (particulate removal, water sensing and/or phase separation detection) • Pre-existing filtration challenges in your operation • Expectations for the filter’s capacity or service life in ideal fuel system operating conditions • The ideal micron rating for the application FMNMagazine

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INDUSTRY NEWS

Technology Incentives Help C-Stores Achieve EMV Gilbarco Veeder-Root and Patriot Capital have announced a limited-time incentive program to help c-store operators upgrade their sites. The program offers convenience store retailers incentives of up to $13,000 per site. The new program provides three levels of incentives around Encore® 700 S dispensers, the Passport® Point-of-Sale system, the Impulse™ upselling solution and financing from Patriot Capital. The limited time incentives total up to $13,000 per site, with additional incentives available for alternative site configurations or for retailers upgrading to Passport PX-60. Other restrictions may apply. Retailers installing new Encore 700 S dispensers are eligible to benefit from Section 179 tax incentives in 2017 for equipment installed by December 31. n

Axxis Fuel Order Management & Dispatch Wins the CODiE Award for Best Logistics & Supply Chain Solution

and in-house drivers via mobile technology. Feedback from the judges emphasizes the value and thoughtful design of the tool. One judge described it as “straight forward and allows the manager to optimize fuel allocation and timing … formerly a whiteboard event.” Another judge stated that it “addresses a complex requirement in an easy-to-use way,” and multiple judges commented on the quick invoicing feature as a “key cash flow benefit.” n

7-Eleven®Launches Carbon Reduction Test Program 7-Eleven, Inc. is furthering its commitment to reduce its energy footprint by launching a test program called RENEW™ this month at 95 stores in Portland, Seattle and Madison, Wisconsin. RENEW is a reduced emissions program 7Eleven® is launching in collaboration

Axxis Software’s Fuel Order Management & Dispatch (FOMD) module has won the 2017 SIIA CODiE award as the Best Logistics & Supply Chain Solution. SIIA CODiE award winners represent the best products, technologies and services in the software, information and business technology industry. Axxis Software’s FOMD provides a centralized order entry and dispatch management application to streamline the fuel ordering to delivery process and provides users real-time visibility via a secured web portal. Integrated workbenches enable greater control over logistics, including inventory status/forecasting, alerts/notifications, fuel sourcing and dispatch status. FOMD also provides real-time two-way communication with common carriers FMNMagazine

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with GreenPrint, a company promoting sustainability through the retail gasoline, fleet and consumer product industries. Customers will be able to reduce emissions by simply purchasing the same high-quality fuel they have always pumped at 7-Eleven stores. GreenPrint will calculate tailpipe emissions from gasoline sales to determine the amount to invest in certified carbon reduction projects to help neutralize those emissions in the atmosphere. Depending on the type of fuel purchased, emissions can be offset by up to 30 percent. For every gallon of gas purchased in the 7-Eleven RENEW program, an investment will be made in reforestation, greenscape projects, wildlife protection and renewable energy projects designed to help reduce car emissions. The local, regional and global certified carbon reduction projects are designed to remove carbon dioxide from the atmosphere. As part of the one-year test, 100,000 trees will be planted across the United States in cooperation with the Arbor Day Foundation.

INDUSTRY NEWS 7-Eleven announced in 2016 that it was working with Conservation International (CI) to set measurable corporate social responsibility (CSR) goals to reduce its environmental footprint. 7-Eleven’s CSR mission has three focus areas: planet, products and people. The retailer also joined CI’s Business and Sustainability Council, a forum for corporate leaders taking positive environmental actions in their businesses, to explore mutually beneficial ways to further reduce its environmental impact. n

Crompco Becomes Leighton O’Brien’s Newest Fuel Cleaning Distributor Crompco, known as one of the USA’s leaders in underground storage tank (UST) inspection, compliance, testing and construction and their exclusive AccuMeasure services and global tank and fuel management company Leighton O’Brien announced the distributorship of Leighton O’Brien’s patented fuel cleaning and polishing services. The fuel cleaning and polishing services will officially launch the first of three systems in October. Crompco will deliver Leighton O’Brien’s market-leading fuel cleaning and polishing technology to its clients. The service will be conducted by fully trained and safety-certified Crompco technicians and supported by expert fuel data analysis and comprehensive reporting by Leighton O’Brien’s highly qualified analysts. n

Fluor Celebrates 20 Years of Irving Oil Alliance Fluor Corporation recently celebrated 20 years of providing engineering, procurement and construction support services for Irving Oil Ltd. Since 1997, Fluor has supported projects ranging from sustaining capital to major growth projects at Irving Oil’s refinery and marine terminal in Saint John, New Brunswick, Canada. Fluor’s personnel are integrated with the Irving Oil team working on-site at Canada’s largest refinery. Around 100 projects are carried out each year by the joint site team with an execution capability of up to $300 million annually. The team has saved more than $100 million through value creation efforts over the past 13 years and has worked more than seven years without a single recordable incident. “We are proud to work alongside Fluor team members each and every day on our site as we continue to create jobs and deliver projects together safely,” said Mark Sherman, Vice President and Chief Operating Officer of Irving Oil. n

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INDUSTRY NEWS

Excentus’ National Fuel Rewards® Program Reaches Two Major Milestones During a five-year period when overall membership growth and participation in U.S. loyalty programs has waned, Excentus—a provider of loyalty technology and marketing solutions to national and regional brands, convenience retailers, grocers and consumer packaged goods manufacturers—has achieved two major milestones: growing its Fuel Rewards® loyalty program to 10 million members and helping U.S. consumers save more than $1 billion on the cost of fuel. The company’s achievements contrast with recently published loyalty survey data from Colloquy, which finds that membership in U.S. loyalty programs grew by only 15% in 2016—down from growth rates of 26% and 27%, respectively, in 2014 and 2012. And of the 3.8 billion individual loyalty program memberships identified in the U.S., only 46% show active participation according to the recent study. n

DocuSign’s PowerForms application goes one step further to eliminate paperwork and document preparation time by creating on-demand, self-service e-forms and documents for signature. DM2’s interface eliminates the time required to manually upload and export documents as well as data to and from Petroleum Insights CRM. With DocuSign eSignature and PowerForm applications, DM2 customers can now spend more time selling and servicing customers by eliminating the time associated with generating, distributing, following up on and waiting for credit applications, sales order forms, NDA, releases, waivers, etc. n

Ryder Partners with Chanje Energy to Become Exclusive Sales Channel Partner and Service Provider Ryder System, Inc., a leader in commercial fleet management, dedicated transportation and supply chain solutions, announced that the company will become the exclusive sales channel partner and service provider for Chanje, a new California based medium-duty electric vehicle (EV) and energy services company. As part of their future technology strategy, Ryder has placed its initial order of Chanje vehicles, the first of which will be distributed to Ryder locations in strategic U.S. markets and be available for ChoiceLease customers in the coming weeks. Additionally, a portion of the new vehicles will be added to Ryder’s commercial rental fleet so customers will have the opportunity to experience Chanje’s advanced vehicle technology on a short-term basis. Chanje is the first company in North America to offer large-scale fleets of electric medium-duty trucks. Chanje’s EVs offer class-leading payload and cargo capacity, as well

DM2 Partners with DocuSign to Offer eSignature and On-Demand Forms Solutions DM2 Software, Inc., a leading provider of software solutions for petroleum marketers, is pleased to announce it has partnered with DocuSign to provide an integrated eSignature and on-demand form solution. By integrating DocuSign eSignatures and PowerForms applications with DM2’s Petroleum Insights CRM system, marketers can quickly and securely upload and send Microsoft Word, PDF or other common document formats from their CRM document library for business partners, customers, employees, prospects, etc., to sign and store in the CRM. DocuSign eSignatures assists by sending reminders and giving marketers the ability to check signing status at any time. FMNMagazine

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INDUSTRY NEWS as zero exhaust emissions. Ryder will also offer a combination of comprehensive and preventive maintenance solutions as part of Ryder’s SelectCare fleet maintenance portfolio. Chanje’s first vehicle will be an all-electric large delivery-style van, a medium-duty truck equipped to haul up to 6,000 pounds and up to 580 cubic feet of cargo—all with zero tailpipe emissions. Chanje vehicles are designed to be electric from the ground up, making them inherently more efficient than retrofit electric vehicles. Ryder will work with Chanje to develop charging infrastructure for the vehicles, with a focus on using renewable energy. Chanje’s last-mile EVs fit best where they are needed the most—in highly populated urban areas where pollution and noise are a mounting concern. Replacing a diesel truck with an EV will save as much carbon dioxide (CO2) emissions as 20 acres of U.S. forest would absorb in one year. n

Key Information Technologies, Inc. Releases New Mobile App Key Information Technologies, Inc., a leading provider of accounting and enterprise resource planning (ERP) software for petroleum marketers, is proud to announce the release of its new mobile app, BookWorks MobileConnect. Get your customers connected in real time using their Android or Apple iOS product directly in your BookWorks Petroleum Management and Accounting System. Users can review their account status including invoices, payments, statements and drafts. With the ability to securely place orders directly into the dispatch queue, check pricing or make payments all from their smart phone or tablet, it creates a tremendous advantage by drastically reducing customer service calls, increasing cash flow and making it easier to obtain new sales without increasing your labor costs.

Home heat and commercial fueling customers will be able to review and adjust individual tank levels and view tank histories. With push notifications, customers receive pop-up notifications of order acceptance, deliveries, draft notices and many other communications. There is also a general document area for contracts, special notices, delivery ticket images and even pictures. n

Matrix Advises Revere Gas on the Acquisition of Two Propane Companies Matrix Capital Markets Group, Inc., a leading independent middle-market investment bank, announced the successful acquisition of two propane gas companies by Revere Gas, Inc. On June 1, Revere closed on the acquisition of Dixie Fuel Company, which is headquartered in Newport News, Virginia, and supplies propane gas to over 1,300 retail and wholesale customers in the Peninsula area. On August 1, Revere closed on the acquisition of Natural Gas Company of Virginia, Inc. (DBA Mr. Able Propane). Headquartered in Richmond, Virginia, Mr. Able Propane is a regional distributor of retail and wholesale propane gas and a retailer of HVAC equipment serving over 3,000 customers. Founded in 1942 and celebrating its 75th anniversary, Revere Gas has enjoyed continued growth and productivity for three generations. Led by Carlton Revere, President, and Craig Revere, Executive Vice President, the company has built a stellar reputation for providing timely and reliable service, with a strong focus on safety and serving their local communities. The two most recent acquisitions add increased bulk storage facilities and new personnel, further increases their reach throughout eastern and central Virginia, the Middle Peninsula and the Northern Neck and expands their propane and associated products and services to over 26,000 customers. Matrix provided merger and acquisition advisory services to the company, which included advising on valuation, deal structuring and financing options. n

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INDUSTRY NEWS

FLEETCOR Completes Acquisition of Cambridge Global Payments, a Leading B2B International Payments Provider FLEETCOR Technologies, Inc., a leading global provider of commercial payment solutions, has closed its acquisition of Cambridge Global Payments, a leading business-to-business (B2B) international payments provider, for approximately $690 million. The purchase agreement was previously announced on May 1, 2017. Cambridge, founded in 1992, processed $25 billion in B2B cross-border payments in 2016, helping more than 13,000 business clients make international payments to suppliers and employees. Cambridge’s proprietary technology serves the needs of small and medium businesses (SMB) and mid-cap businesses, enabling its clients the flexibility of making wire, EFT,

draft and check payments in over 140 currencies. Cambridge’s headquarters will remain in Toronto, Canada. The acquisition of Cambridge provides FLEETCOR with entry into the $145 billion B2B cross-border payments market. The addition of Cambridge’s global corporate payments capabilities will enable FLEETCOR to pay both domestic and international AP payments for the same client, a significant differentiator in the commercial marketplace. n

OPW Introduces New Matador Composite Cover OPW, a Dover company and a global leader in fluid handling solutions, is pleased to introduce its all-new Matador Composite Cover for use at petroleum retail operations, as well as commercial and industrial driveway applications. OPW performed lab tests of its new Matador Composite Cover against three

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competitors, all of which meet the H-20 standard from the American Association of State Highway and Transportation Officials (AASHTO). Testing the life performance for 25,000 cycles at the H-20 standard weight, the Matador Composite Cover far surpassed the durability of two top competitors and weighed 70% less than the third. The “Life Performance Testing” study demonstrates how the Matador maintains the integrity of its level surface (permanent set) through a lightweight and durable material. Available in 37- and 42-inch options, the Matador Composite Cover is lightweight and water resistant. The flared skirt provides spacing around the sump lid equivalent to 39- and 44-inch covers. This flared design promotes maximum water percolation. Standout features include a painted steel frame, a stainless steel recessed lift handle and a polyethylene skirt with flair that prevents corrosion and rust. Additionally, an exterior tread pattern prevents the risk of back, foot and hand injuries. n

INDUSTRY NEWS

Graves Oil Company Selects AIMS’s Commander Accounting Software AIMS, Inc., a leading provider of strategic accounting software for wholesale petroleum marketers, is pleased to announce that Graves Oil Company, located in Batesville, Mississippi, just purchased AIMS’s COMPAS Commander accounting software. AIMS will provide Graves with a comprehensive accounting solution that includes extensive process automation that will simplify their daily routines, reduce clerical errors and improve efficiencies. Kenny Hopper, Treasurer at Graves Oil Company, said, “In today’s market, you have to stay ahead of the game. With technology changing every day, we realized that we had to make a change with our fuel and accounting software. After several months of looking at different software companies, we chose AIMS’s Commander accounting software.

I believe both Commander and the people of AIMS will help our company continue to move forward for many years down the road. They are down-to-earth folks and have been very helpful and friendly.” n

SPATCO Energy Solutions’ Headquarters Relocates to Support Recent Growth SPATCO Energy Solutions has relocated its corporate headquarters to 8303 University Executive Park Drive in Charlotte, North Carolina, after 53 years at 4800 North Graham Street, also in Charlotte. The move allows for expansion of shared services functions. The balance of SPATCO’s Charlotte operations, including service, construction, manufacturing and central warehousing functions, will remain at the Graham Street location for the time being. A search is ongoing to relocate these operations into a more modern and expansive facility.

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Earlier this year, SPATCO opened a branch office in Memphis, Tennessee, and acquired PetroTech, LLC, a Mississippi-based petroleum equipment and service provider. With operations in those states as well as in North Carolina, South Carolina, Alabama, Florida, Georgia and Virginia, the company has over 350 employees, including 150 field service technicians. SPATCO Petroleum Solutions, a Blue Ridge Industries company, provides fueling equipment for retail and commercial customers as well as professional services such as electrical installations, turnkey projects, batching systems and service/repair. In addition to serving the petroleum and industrial industry for nearly 90 years, SPATCO Energy Solutions is the North American distributor and nationwide service and installation provider for Galileo USA natural gas conversion equipment. The company also manufactures and distributes a full line of diesel exhaust fluid (DEF) dispensing systems. n

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What Does That Mean

Test Your FMN Acumen

The list below represents acronyms used in this issue of Fuel Marketer News. /b Per Barrel AASHTO American Association of State Highway and Transportation Officials API American Petroleum Institute AST Above Ground Storage Tank ASTM American Society for Testing and Materials B2B Business-to-Business BTU British Thermal Unit CAFE Corporate Average Fuel Economy CAGR Compound Annual Growth Rate CARB California Air Resources Board CFPP Cold Filter Plugging Point CNG Compressed Natural Gas CO2 Carbon Dioxide DEF Diesel Exhaust Fluid EAP Employee Assistance Program EIA U.S. Energy Information Administration EMV EuroPay MasterCard Visa EPA U.S. Environmental Protection Agency ERP Enterprise Resource Planning EU European Union EV Electric Vehicle FDA U.S. Food and Drug Administration FFV Flex-Fuel Vehicle Gal Gallon GDP Gross Domestic Product GHG Greenhouse Gas HDHP High-Deductible Health Plan HDV Heavy-Duty Vehicle HFO Heavy Fuel Oil HPCR High Pressure Common Rail ILTA International Liquid Terminals Association kbpd Thousand Barrels Per Day LCFS Low Carbon Fuel Standard LDV Light-Duty Vehicle MDV Medium-Duty Vehicle MMbbl Million Barrels MMbpd Million Barrels Per Day MOMR Monthly Oil Market Report

FMNMagazine

MTOE NAAQS NACS NBB NBGH NHTSA NOx OECD OEM OPEC PEI POS PP ppb ppm RFS RHD RIN ROI RVO RVP SMB SOx SPCC SPFA STI

SUV Tcf

TPA

UAE

ULSD

ULSFO US$ UST

WTI

109

Million Tonnes of Oil Equivalent National Ambient Air Quality Standards National Association of Convenience Stores National Biodiesel Board National Business Group on Health National Highway Traffic Safety Administration Nitrogen Oxide Organization for Economic Co-operation and Development Original Equipment Manufacturer Organization of the Petroleum Exporting Countries Petroleum Equipment Institute Point of Sale Pour Point Parts Per Billion Parts Per Million Renewable Fuel Standard Renewable Hydrocarbon Diesel Renewable Identification Number Return on Investment Renewable Volume Obligation Reid Vapor Pressure Small and Medium Business Sulfur Oxide Spill Prevention Control and Countermeasures Steel Plate Fabricators Association Steel Tank Institute

Sport Utility Vehicle Trillion Cubic Feet

Third-Party Administrator United Arab Emirates

Ultra-Low Sulfur Diesel

Ultra-Low Sulfur Fuel Oil U.S. Dollars

Underground Storage Tank West Texas Intermediate

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ADVERTISER’S INDEX

OUR ADVERTISERS COMPANY

PAGE

COMPANY

PAGE

ADD Systems................................................35

OmegaFlex..................................................11

AIMS.......................................................... 28

PriceAdvantage............................................ 39

Advanced Fuel Solutions................................ 106

OPW................................................ 15 and 53

American Coalition for Ethanol.........................102

RDM............................................... Back Cover

Argus........................................................104

Renewable Energy Group................................ 68

Ascentium Capital..........................................19

ROTH......................................................... 71

Biobor........................................................46

Rovanco....................................................101

Cummins & White......................................... 89

Scully.......................................................103

Dennis K. Burke............................................ 23

Shields, Harper & Co................................. 80 – 81

DM2.......................................................... 98

Sinclair Oil Corporation................ Inside Back Cover

Excentus.......................................................8

Skybitz.......................................................75

FPPF.......................................................... 67

Source........................................................16

Hose Master.................................................79

SPATCO...................................................... 27

Innospec.....................................................50

Steel Tank Institute.......................................107

Keystone.....................................................90

Tanknology................................................. 87

Leighton O’Brien........................................... 40

Trinium...................................................... 34

Liquid Controls............................................. 65 Lock America...............................................105

Southwest Fuel & Convenience Expo..................108

Matrix Capital Markets Group............................61

Wayne....................................................... 45

North American Bancard....................................5

WPMA....................................................... 92

Lomosoft.....................................................20

ValvTect................................................ 54 – 55

MidContinental Chemical Company.............. 72 – 73

WEH..........................................................49

NOV........................................Inside Front Cover

Xerxes..................................................30 – 31

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