Headlines
November 2, 2009
BP to Sign Markert-Wide Deal for Fuelperks Rewards
BP is about to sign a deal to market the "fuelperks" rewards program through its 32-state market, Oil Express learns.
A spokesman for the British major confirms that the company is running a pilot test of the program, but refuses further comment.
BP has been testing the Fuel Perks concept at 120 or so stations in Minnesota
and Wisconsin markets with the Roundy's supermarket chain, as previously
reported (OE 06/30/08).
Some other retailers, including Shell, Sunoco, and a few regional c-store chains and jobbers, already offer "fuelperks" in scattered geographic areas. For example, Shell just introduced it at 64 sites in Jacksonville, Fla., through a deal with the Winn-Dixie supermarket chain and has launched a limited test with Bi-Lo in Greenville, Asheville and Columbia in South Carolina (OE 08/31/09).
But the agreement with BP will be far broader, say sources. For a start, Excentus will give BP the rights to future market rollouts.
In return, Excentus will have what is essentially an exclusive contract that will allow it to roll out its "fuelperks" offer at BP stations market-wide. Jobbers say BP has been bragging of late that more than 90% of its outlets have already signed up for a price rollback program it intends to offer next year.
Big question is how much BP jobbers will have to pay for the privilege of offering fuelperks, and whether it will be worth it.
Individual grocery chains decide how much of a fuel discount they will offer customers -- usually 5cts/gal off per $50 worth of purchases -- and fund it themselves. Marketers pay a transaction fee to cover Excentus's costs, which jobber sources say run 25-49cts/sale. Pump discounts are limited to 20 gallons per fillup.
As to whether it's worth it, according to Excentus, BP and Exxon- branded jobber Steve Uphoff sold more than 14.2 million gals of fuel through the "fuelperks" offer in less than a year.
Uphoff owns the 40-store Uppy's Convenience Stores in the Richmond, Va., market, and supplies another 80 dealers. He signed up for "fuelperks" via Ukrop's, a local grocery chain. The pair launched the program June 30 last year. By July 19, more than 26,000 Ukrop's customers had enrolled in the program. In May this year, Ukrop's announced its 1 millionth customer and said it had given away $7.42 million in discounts, or an average $7.40 per fillup.
"It's a great program and we introduced it a year ago, at just the right time, when gasoline was nearly $4/gal," says Terry Johnson, merchandising director with Chester, Va.-based Uppy's. "We have seen a double-digit increase in gasoline volume. Customers put the ["fuelperks"] card in and the price at the pump just rolls back and people get a big kick out of that," he told Oil Express. As the discounts are "stackable,"
meaning that they can be accumulated based on purchase amounts, some customers have been able to roll back their price to as little as 59cts/gal.
Uppy's costs, apart from the transaction fee, included costs of software and EPOS upgrades, but BP is expected to pay for that work as part of its introduction of its price rollback program next year. Uppy's also funds a small amount of the Ukrop's discount. "I'd definitely recommend the program," Johnson added.
October 21, 2009
New York Sees Temporary Tight Conventional Mogas Supply at Buckeye
The New York Harbor is facing a very tight dead prompt conventional regular
gasoline for Buckeye pipeline delivery, with the cash price differential
holding about a penny premium to any October barrels, traders told OPIS on
Wednesday.
The outright prices were sharply higher on Wednesday, moving in tandem with
the stronger paper values. The cash outright prices were up by 6-7cts at
presstime.
Dead prompt M4 deals for delivery on the Buckeye pipeline on Wednesday and
Thursday were traded at 2.90-3.25cts over the screen.
However, any October barrels on Buckeye were traded at 2.35cts over.
"The backwardated disparity between the prompt and any values shows that it
is a dead prompt supply issue," a trader said.
Arbitrage incremental gasoline barrels from the Gulf Coast are expected to
arrive via the Colonial pipeline in the first half of November.
The market outlook for gasoline in New York Harbor seems stable to bearish
for end-October and early November.
Conventional regular for barge delivery was valued at 2.35cts over the
screen for the rest of October.
Both Buckeye and barge M4 prompt values should start to weaken when the
arbitrage barrels hit the market, and the price trend should flip into a
contango.
Prompt RBOB was traded at parity to the screen, and any values were flat to
prompt.
European arbitrage barrels are expected to arrive in the Northeast in the
last five days of October as well as the first half of November.
October 9, 2009
Sam's Club Well Ahead of Competitors in Diesel Offering
Warehouse chain Sam's Club hasn't tooted a green trumpet when it comes to diesel, but it looks as though the retailer could be way ahead of other big box chains when it comes to diesel offerings to customers.
The company just closed an older club in Sacramento and opened a store some 40,000 square feet larger on the other side of town that will have the first Sam's Club diesel pumps in northern California. But more importantly, company officials now confirm that all new store openings will see diesel pumps as part of the standard fuel offering. The Wal-Mart subsidiary didn't roll out its first diesel pump until three years ago, but now has about 90 sites with the fuel.
There are no plans to put diesel into Sam's Club parking lots that had gasoline before the 2006 diesel rollout, but the new store offerings clearly give the chain a leg up on competitors Costco and BJ's.
Observers have no word on typical volumes, but a look at retail and wholesale costs for about 50 sites suggests the company has a different model when it comes to diesel fuel. Historical data has long showed that Sam's Clubs sell gasoline for a modest few pennies above cost, but its retail diesel prices have been much
less aggressive.
Data from OPIS RetailFuelWatch over the last five weeks, for example, finds most Sam's sites priced at 15-25cts/gal above laid-in wholesale costs plus tax.
There are some exceptions -- stores in some metro areas in Arkansas, New Mexico, Ohio, Colorado, and Florida have seen margins of 1-4cts/gal or less.
But within the network, there are also clubs in Pennsylvania, Nevada, and Alaska where diesel has fetched margins above 30cts/gal.
Most oil analysts believe that U.S. diesel growth will outpace gasoline demand growth in the next ten years. That possibility has sparked aggressive rollouts of diesel by low-priced chains such as RaceTrac but many similarly sized retailers have yet to make the diesel plunge.
September 14, 2009
BP Says Marketers Can Only Use 89-Octane to Blend
BP says it will make available an unleaded gasoline that jobbers can use for ethanol blending at some of its terminals in North Carolina on Oct. 15.
Problem is, it will be an 89-octane midgrade - BP plans to drop its other two conventional grades, an 87 regular and 93 premium, from its product slate, Oil Express learns.
BP's move puts ethanol blending beyond the economic reach of most of its jobbers in the state. Year-to-date OPIS data shows that BP typically prices its
89 midgrade 6cts/gal or more over its 87 regular. The federal tax break for ethanol fuel is 4.5cts/gal.
BP's decision has infuriated marketers. They see it as a mean-spirited and cynical attempt to get around a new state law that requires refiners to offer an unblended fuel for those who want to produce their own E10 gasoline. Jobbers in other states are eyeing similar legislation to preserve their rights to blend their own fuel.
However, the NC law has a loophole - it does not specify the grade that a refiner must make available. BP, which together with other majors is fighting in federal court to overturn the law, is clearly not following the spirit of the statute, jobbers say.
"This basically takes away our ability to produce an ethanol-blended fuel,"
says one large BP distributor in the state.
"My company buys a lot of unbranded fuel from BP and by doing this, they are going to start missing all of those sales. We're going to quit buying from them. We're going to start looking to do the best we can for our company now. A lot of BP jobbers in North Carolina are ready to quit BP over this. There are plenty of other majors here looking for our business."
The aim of the blending rights bill North Carolina lawmakers passed last year was
to allow marketers to produce their own ethanol blends and pass on some of those savings to consumers, says the North Carolina Petroleum & Convenience Marketers Assn.
BP's decision to offer only an 89 conventional midgrade effectively forces marketers to buy only BP-branded fuel. As a result, consumers in the state are likely to have to pay more at the pump for gasoline. The new product slate only reveals BP's desire to control the way marketers price their product, sources add.
Majors normally make midgrade by blending an 87-octane and a 93 premium.
Since BP will no longer have an 87 unleaded available, the company is looking at two options for producing an 89 midgrade.
For the E10 product, it will ship an 84-octane fuel and blend it with 93- octane premium. For the non-ethanol 89, it is expected to use a 90-octane conventional blendstock that will be shipped by pipeline to the terminal before year's end.
BP could make the same 84-octane grade available to jobbers for ethanol blending but it will not do so. It cites worries about product integrity and quality. Besides, says spokesman Scott Dean, it has to produce a set amount of ethanol-blended fuel to comply with federal renewable fuel standards.
BP notified jobbers in a Sept. 1 letter that it plans to sell only a midgrade "suitable for subsequent blending" at its Selma and Greensboro terminals. The fuel will be dosed with a "sufficient quantity of additive" so that it will meet "both BP brand and applicable legal additive requirements," wrote Elizabeth R. Clechenko, BP's East Gulf Coast sales VP.
"While some competitors may choose to sell an unfinished gasoline product to their customers, BP is not willing to sell unfinished fuels to its customers in light of the quality, integrity and compliance risks at stake," Clechenko said.
In the future, jobbers pulling from Greensboro and Selma must choose on a monthly basis, 30 days in advance, whether they plan to lift BP-branded E10 or the midgrade. Marketers must also have a splash-blending waiver from BP and BP will not allow them to split their volumes between ethanol and straight-run fuel.
"BP will assume customers intend to lift the full slate of BP E10 fuels unless notified otherwise," Clechenko added.
BP's Greensboro and Selma terminals supply about two-thirds of the company's volume in North Carolina, jobbers say.
A jobber who adds 10% ethanol to an 87-octane gets an 89.7-octane product that he can sell as regular or midgrade product. Adding 10% ethanol to an existing 89-octane fuel would yield a 91.5-octane that some jobbers sell as a premium fuel. (BP guarantees its Amoco Ultimate premium to be a 93-octane, so a marketer doing his own blending could not sell his highest grade under the Amoco banner.)
By selling only an 89-octane, BP is stripping marketers of the tax advantage they would get from blending their own product, keeping it for itself.
For example, a Selma marketer who bought 87 unleaded conventional from BP this week could shave about 7.5cts/gal off his net wholesale price for regular, thanks to an ethanol price that is currently about 20cts/gal below gas, plus the 4.5cts/gal federal tax break, and the value of RINs (about 9cts/gal recently).
All but 1.5cts/gal of that advantage disappears if the marketer has to start the blending process with the more expensive 89-octane midgrade.
Marketers could not afford to sell such a product as a regular grade and BP knows it, jobbers say. "BP is going to take its piece of jobber hide anyway it can," one marketer says.
September 1, 2009
Colonial Pipeline Allocates Gasoline Deliveries Again; Outlook Bearish
The gasoline market outlook for the east of the Rockies continues to look bearish
for early October, following the allocation of Cycle 51 on the Colonial gasoline pipeline on Tuesday.
This reflects the ample gasoline supplies on the Gulf Coast. Also, players are attempting to push as much gasoline out of that region to the Midwest and Northeast. This has been the ongoing trend since mid-August.
Prior to the latest allocation, Colonial had allocated gasoline deliveries on Line 1 for Cycle 50 and frozen nominations on Cycle 47-49.
In an allocation, shippers can ship based on historical delivery volumes, and a freeze means shippers may not increase nominations north of Collins, Miss.
Colonial said that nominations on Line 1 for Cycle 51 exceed Colonial's ability to meet its five-day lifting cycle.
As a result, Cycle 51 on the gasoline pipeline north of Collins, Miss., will be allocated.
The confirmation or resubmission of nominations are due by the close of business on Wednesday. The Cycle 51 begins closing on Sept. 8.
Colonial Cycle 51 is expected to pump from Pasadena on Sept. 12-14, and the elivery into New York Harbor is slated for early October. It takes about 19-22 days to reach New York.
For Cycle 51, shippers are pumping M3 and F3 grades to New York. F3 is used to blend F4 grade in the New York Harbor market.
New York Harbor is expected to see significantly more higher-RVP F3 RBOB ompared with the tight F2 supply. The market will make its official transition to the higher-RVP winter grade from summer RBOB on Sept. 16.
A European trader said that more incremental F3 barrels are making their way to the New York Harbor in the second half of September, taking advantage of a marginally open arbitrage window.
Besides allocating gasoline deliveries, Colonial had also allocated the Line
2 for distillates deliveries on Cycle 51.