What Is the Holy Grail of Fuel Executives?

FuelQuest releases 2nd annual Eye on Energy survey

FuelQuest (CSP Daily News / CSP Daily News / Fuels / Technology)

HOUSTON -- With an increased awareness of the "new normal" of fuel volatility, respondents to a new industry survey ranked margin management as the No. 1 business priority (42%) this year, while improving the fuel invoicing process closely followed behind at No. 2 (40%). FuelQuest Inc., an on-demand software and technology services company for the global downstream energy industry, has announced the results of its second annual Eye on Energy survey.

Conducted at its 10th annual GRAIL conference, the survey spotlights the 2014 business priorities and challenges of more than 180 fuel market leaders from retail, distribution, supply and transportation companies. The results also address sentiments and strategies around margin management, hurricane preparedness, alternative fuels and U.S. energy independence.

According to FuelQuest calculations, a single truckload of fuel costs approximately $30,000 and on average 10% or more of these invoices have inaccuracies. These costly mistakes highlighted by recent invoicing scandals signal a need for improved invoicing in the industry. Other priorities that are top of mind include business acquisitions (38%) and improved fuel management (32%).

With the Atlantic hurricane season now under way, retailers, suppliers and fleets are well aware that they should be prepared for hurricane season and are implementing necessary preparedness strategies. Even though reports state that this year's season could be a quieter year than normal, it is important that businesses not neglect the implementation of emergency preparedness strategies.

According to the FuelQuest Eye on Energy survey, basic preparedness seems to be understood and implemented as over half of respondents have contracted supply (54%) and emergency preparedness plans (52%). However, businesses overwhelmingly do not consider generators to be a top priority despite their help in emergency situations as witnessed during Hurricane Sandy, with only 22% of respondents currently prepared with installed generators.

Very few are applying other key strategies critical for optimal preparedness: Only 28% have secondary or tertiary supply arrangements. And less than a quarter (18%) have fuel management automation.

With today's fuel volatility and the possibility for an increase in volatility throughout the hurricane season, fuel companies shared strategies that will help mitigate market fluctuations and improve margins that have traditionally been difficult to calculate. Survey respondents indicated that real-time margin visibility is the best way to combat fuel price fluctuations (34%). Improved demand forecasting ranked second with 28%.

Other strategies include:

  • Diversified supply portfolio management (26%)
  • Greater forecourt automation (18%)
  • Automated buy recommendations (16%)
  • Improved credit terms (6%)

Despite price disparities between compressed natural gas (CNG) and liquefied natural gas (LNG) to traditional diesel fuel, the industry is uncertain about their future plans related to these--32% of participants were 'unsure' about how CNG and LNG fit into their company's future plans; however, 28% of respondents indicated that natural gas was part of their existing portfolio.

Other responses include:

  • Don't plan to adopt (20%)
  • Under review (12%)
  • Plan to adopt in the next one to three years (6%)
  • Plan to adopt in the next three to five years (2%)

According to the U.S. Energy Information Administration (EIA), last year's biodiesel production reached 1.35 billion gallons and ethanol production reached 13.8 billion gallons due to the recently released U.S. Renewable Fuel Standards (RFS). GRAIL respondents agreed with this call-to-action with 46% citing biofuels as a key driver helping the U.S. achieve energy self-sufficiency. Respondents also stated increased exploration as the single most important factor (48%) while also citing less governmental regulation (34%).

"This year's GRAIL conference unveiled remarkable insights from key market leaders within the energy industry underscoring unique perspectives around issues impacting fuel price volatility and alternative sources of energy," said Phil Fraher, president and CEO of FuelQuest, Houston. "The 2nd Annual Eye on Energy survey highlighted the need for automated solutions to help downstream organizations better manage operational challenges. It's this kind of knowledge that helps our company effectively address key customer challenges."

FuelQuest conducted this survey in-person during its GRAIL conference in Nashville, Tenn., from April 22-23, 2014, with more than 180 fuel executives, managers and professionals with retailers, distributors, suppliers, and fleet-based companies in attendance. More than half of the survey participants are industry leaders who annually buy, sell, or transport more than 300 million gallons of fuel. Now in its 10th year, GRAIL offers insight into how leaders from their respective industries are addressing critical fuel trends and challenges facing the market today.