CHICAGO — After a false restart last summer, when it seemed the COVID-19 pandemic was fading and things might go back to whatever people used to call normal, along came the delta and omicron variants. Commuter traffic, which had dropped off, remained stagnant as many people continued to work from home, hurting fuel demand and making it harder to plan for the future.
“You’ve got things like seasonal demand being higher during summer and then fading into the winter, and then you’ve got different peaks and valleys with COVID,” says Brian Renaud, director of retail fuel pricing and analytics for c-store retailer Sheetz Inc., Altoona, Pa.
“We have periods of optimism and periods of pessimism. With anything related to fuel retail and demand, there’s always a bunch of things happening at once. And so, the picture’s never completely clear,” he says. He points to a wide array of factors affecting fuel price, volume, forecourt traffic and more, including seasonal demand and the ups and downs of the COVID-19 pandemic.
“We’ve been lucky in that we’ve been able to be pretty aggressive on retail in terms of driving volume to our stores. But on top of that, we’ve probably got a wider mix of products than a lot of other retailers do,” he says. “When you think about products like E15 or E85, we’ve got price points in the market at a time when general 87 regular prices are high. That can be really compelling to even those that are less price sensitive.”
“The idea of saving a penny or two on gas when retail prices are at $3 or $3.50 isn’t as compelling as it used to be.”
Renaud says demand and gallon performance at Sheetz has been close to 2019 levels. He says diesel fuel for consumer vehicles has even outperformed 2019 levels in 2021. “That’s been pretty positive for us,” he says.
Sheetz has been expanding its commercial diesel offer in terms of the number of sites, parking spots and the number of pumps, he says.
Despite supply-chain issues and a shortage of truck drivers, Renaud attributes the good performance from diesel to the rise in online ordering.
“There’s so much demand in terms of at-home shopping and folks choosing to basically have things sent to them rather than going to get it across a spectrum of industries and products, that just drives more commercial diesel demand,” says Renaud.
Additionally, he says, commercial drivers spending company funds have a different price sensitivity regarding fuel compared to regular customers who are spending their own money on fuel. And when they have to get products from point A to point B, truck drivers don’t have the flexibility that motorists do to possibly take fewer trips and travel less. Renaud says he’s seen plenty of small independent stores go out of business in southeastern states such as North Carolina.
“Price-wise, those types of retailers were always super aggressive with a lot of local loyal customers that would drive 10 minutes out of their way, past the Sheetz and past the Speedway, to go to see their buddy and pay maybe a cent or two less,” he says, but that’s not the case anymore in today’s market. “The idea of saving a penny or two on gas when retail prices are at $3 or $3.50 isn’t as compelling as it used to be,” he says. “The value of a cent just isn’t the same anymore.”
Pricing, meanwhile, has become more dependent on real-time changes and less about the price motorists see on the street when they pass a c-store, says Renaud. These days, he says, the c-store experience matters more than the price. “Mom-and-pop gas stations that don’t have a great backcourt, clean bathrooms, and consistently clean and well-lit stores are going out of business,” he says.
“I honestly don’t think there’s a lot of upside in terms of profitability with chasing volume anymore,” says Renaud.
These days, he says motorists have their own driving patterns. They might not have the time to search for lower fuel prices. Waiting for a specific time of day on a specific day of the week to undercut the local market by 3 cents doesn’t shift driver behavior like it used to, he says. The new reality, according to Renaud, is that any major retailer can match that price within 30 minutes via automated pricing.
“That try-hard local retailer taking prices down to induce more demand … I don’t know that the juice on brand loyalty is there anymore,” he says.
Meanwhile, consumers are increasingly ready to waive off a higher gas price for the sake of convenience.
“Folks are getting sick and tired of this whole narrative around vaccinations and staying home and not being around people. At some point, folks that miss their old lifestyle, the old normal, are going to start venturing out more and start to experience life,” says Renaud. “We expect to see some additional demand in that the cost of flying is so much higher” than driving.
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