HOUSTON -- At its recent annual GRAIL fuel industry and user conference, FuelQuest Inc., the leading on-demand software and services company for the global downstream energy industry brought together more than 140 market leaders from retail, distribution, supply and transportation companies. To understand what trends and challenges are driving these businesses, FuelQuest conducted its first annual Eye on Energy Survey at GRAIL. The results of this survey showed an increased focus on addressing fuel price volatility and margin visibility, strong support for more progress on achieving U.S. energy independence, greater sensitivity towards severe weather preparedness and heightened interest in natural gas liquids (NGL).
"At our recent GRAIL conference, industry leaders engaged in spirited discussions concerning trends and issues that affect all businesses that buy, sell, or transport bulk fuels,'' said Matt Tormollen, FuelQuest president and CEO. "The Eye on Energy Survey underscored the need for strategic planning and technology automation initiatives that tackle emerging opportunities as well as addressing tactical fuel and tax management challenges today."
Key insights from the FuelQuest Eye on Energy Survey revealed:
- Fuel Price Volatility Demands New Ways to Manage Margins. Prior to 2004, fuel buyers were less concerned with day-to-day price changes--five cents or more moves occurred only 1.5% of the time; today, they happen 25% of the time. Worse, price swings of three cents or more happen nearly 50% of the time versus just 6% pre-2004. This volatility and its potential to impact margin negatively are permanent fixtures for retailers. According to survey respondents, the following top three strategies would help them navigate these price swings: Real-time margin visibility (31%); diversified supply portfolio and optionality (26%); and improved demand forecasting (22%).
- Energy Independence Needs More Action, Fewer Words. Most Americans share a desire for energy independence, but a debate has raged for the past 30 years on how to achieve this independence. Although recent attention has focused mostly on divisive solutions such as the Keystone Pipeline or alternative sources of energy, survey respondents indicated the following are the most urgent drivers for gaining energy independence: Alternative sources of energy--biofuels, nuclear power, solar power, wind power (37%); increased oil exploration (18%) or specifically increased Arctic exploration (7%); less regulation (13%). Only 2% of respondents said "stay the current course," signaling an industry call for more action.
- Businesses Brace for Super Storm Impact. The total number of global tropical storms continues to rise and now approaches 80 to 90 each year. Companies know that they must prepare for severe weather to maintain business continuity and to aid in recovery efforts within their community. According to survey respondents, ahead of a hurricane or other significant supply- and demand-disrupting event, fuel retailers should focus on establishing the following: Emergency preparedness plan (18%); contracted supply of fuel (13%); established communication plan (13%); and secondary or tertiary fuel supply arrangements (13%).
- Natural Gas Liquids, Electric Adoption on the Horizon. With NGL prices well below traditional fuel prices, survey respondents are examining CNG and LNG as potential portfolio fuels. In fact, 20% are reviewing adoption options today, and 18% plan to adopt within the next five years. Respondents also cited availability of fuel sources (18%), cost of conversion (16%) and tax incentives (16%) as the top three areas that will impact their future plans for NGLs. In the next three years, when it comes to electric vehicle charging station adoption, 60% of respondents said they are not considering it, 23% do not know yet, and 17% are currently adopting.
- Margin Management Becomes Top Business Priority. Successful management of fuel margin is challenging for fuel retailers in an unceasingly volatile market. Retailers know that fuel pricing is a lynchpin to their overall business success, and as such, nearly a third (31%) of the survey respondents stated that they want real-time margin visibility. The largest segment, 16%, listed better margin management as their top strategic business priority for 2013. In addition, respondents singled out certain governmental policies as significant cost drivers for their business. They indicated the following would have a negative effect on margins: Affordable Care Act (43%); EPA Tier 3 standards (38%); excise taxes (25%).
- Excise Fuel Taxes Need a Revamp. Driven by shrinking tax revenues due to more fuel-efficient cars, less miles driven, and non-inflation adjusted taxes; states are looking closely at introducing new legislation to increase revenue. In fact, in the last year alone, there were 522 motor fuel tax changes in the U.S. While there is great debate at the state and federal level on the appropriateness of higher taxes or changes in tax law, survey respondents recommended these changes as ones the government should consider for motor fuels: Simplified forms and processes (24%); streamlined and consistent processes across all the states (22%); and required electronic filing (16%).
FuelQuest conducted this survey in-person during its GRAIL conference in San Diego from April 23-24, 2013, with more than 140 fuel and tax executives, managers, and professionals with retailers, distributors, suppliers, and fleet-based companies in attendance. More than half of the 70 survey participants are industry leaders who annually buy, sell or transport more than 300 million gallons of fuel. Now in its ninth year, GRAIL offers invaluable insight into how leaders from their respective industries are addressing critical fuel trends and challenges facing the market today.
Houston-based FuelQuest provides on-demand fuel management, tax automation, and compliance solutions for suppliers, distributors, buyers, and traders of petroleum products and other energy commodities. Its solutions deliver operational and financial value to more than 650 customers. These customers include leading global oil companies, international retailers, shippers and government entities. And its fuel management solutions help customers manage the complexity, regulation and market volatility for more than 20 billion gallons of gasoline and diesel fuel annually. Its Zytax solutions ensure compliance and accuracy for tens of billions of dollars of energy-related excise taxes per year.
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