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Don’t Let Recent Fuel Margins Make You Complacent

June 17, 2016

By Jon Scharingson, Renewable Energy Group Inc.

The low fuel prices of the past two years have been good news for the convenience stores.

A drop in prices typically leads to increased profitability for retailers, even though many consumers wrongly assume the opposite is true. Also, if a c-store can get someone to the pump, the chances are better that person will go inside the store, where the real money is made.

Smart retailers, however, aren’t making long-term decisions based on what may be a short-term trend. Most know that the fuel market is volatile and that it wouldn’t be wise to develop a business strategy based on $40-per-barrel oil, or even $50 oil.

John Eichberger, executive director of the Fuels Institute, has heard from a few retailers who worry that the healthy fuel margins from the past two years are hiding deficiencies in other elements of their business.

“Are we benefiting so much from higher fuel margins that our other profit centers are not being paid enough attention,” Eichberger asked.

That’s a question c-stores should be asking themselves. They also should be looking at how they can position themselves for long-term health. Here are two steps they can easily take.

  1. Offer diesel fuel. Stores without diesel dispensers are missing out on a growing segment of drivers. In its annual energy outlook, the U.S. Energy Information Administration (EIA) projects diesel fuel consumption in the transportation sector will increase 23% between 2013 and 2040. And, by the way, the EIA also says gasoline consumption will drop 21% in that timeframe. That’s a significant swing — for both fuels. You cannot tap into this emerging diesel market if you don’t have the fuel in your pumps. And if diesel users are not stopping at your store to fill up, they also are not coming inside your store to make a purchase.

Read the full article.