The fourth quarter of 2014 was a renaissance for rack-to-retail margins. But with oil and refined-product prices spending the past five months climbing back up from multi-year lows, the environment for margins has tightened.
Crude-oil prices dropped significantly to six-year lows earlier this year, as domestic crude-oil production hit its highest levels since the Nixon administration. Supplies of crude oil have reached generational highs as well, further pressuring gasoline prices downward.
That drop in crude-oil prices helped U.S. retail gasoline averages threaten to fall below the $2-per-gallon level for the first time since March 2009.
Typical weak gasoline markets left marketers in strong positions at the end of 2014. December really stood out, as OPIS data shows the average margin in the last month of the year was a very stout $0.351 per gallon.
Since that spectacular fourth quarter, rack-to-retail margins have been compressed, as wholesale prices have started to climb once again. The average margin in the first quarter of 2015 came in at an average of $0.18 per gallon, and the second quarter, though not quite over, is seeing those margins crimped further. At this point, the average Q2 margin stands at $0.138 per gallon.
The calendar is now pointing to the heart of the driving season, and with average margins getting tighter—as of this writing, OPIS data showed an average margin of $0.136 per gallon—there is a very fine line between marketers protecting their margin and market share. Marketers in a tighter margin environment need to pay closer attention to the competition to make sure they are not losing gallons or volume.
To help marketers accomplish this, OPIS has launched PricePro, a new, easy-to-use web-based software program for gas station and c-store operators that provides real-time competitive street pricing data. This service instantly alerts pricing managers of competitor price moves via email or text message.
Many OPIS PricePro customers are reporting additional fuel profits of up to $500/month per store, as well as steadier volumes on top of the boost in margins. Alan Meyer, fuel manager for Mach1 convenience stores in Indiana, said he’s “seen an increase in fuel profitability since I started using OPIS PricePro. Because PricePro instantly tells me when my competitors raise or lower prices, I can react quickly with price adjustments, getting the best margins possible for my stores."
Additionally, current users of the PricePro tool have been able to cut back, if not eliminate entirely, the need for store-manager surveys. This means big savings on liability insurance and keeps your managers where they are most valuable to your operations: inside the store.
Click here to learn more about OPIS PricePro or call (888) 301-2645.
This post is sponsored by PricePro