The Retail Petroleum Marketplace

1

• The Retail Petroleum Marketplace

2
Retail Fuels Market Agenda

• Who sells fuel in America?
• How do retailers determine price?
• What influences fuel prices?
• How profitable is fuel retailing?

3
Who sells fuel in america?
4
Convenience Industry

• 148,126 stores in the U.S.
• 120,950 sell fuels
• 58 are one-store companies
• Less than 1 owned and operated by integrated oil
  companies
• 80 of U.S. fuels sold through c-stores

5
A Small Business Industry
6
Independence is Dominant
7
How do retailers determine price?
8
Retailers Conundrum
9
Fuels Drive Sales, Not Profit
10
Consumers Shop Around

• 2011-2012 Consumer Survey
• 63 shop for fuel by price
• 66 shop for price by observing prices at the
  store and while driving
• 52 of consumers will change their shopping
  behavior for 3 cents per gallon

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Consumer Loyalty is Fickle
12
How Do Retailers Set Price?

• Evaluate competitive market conditions
• Review historic performance associated with
  competitive price deltas
• Might utilize price optimization software
• Direct correlation between gallons sold and
  in-store sales
• Consider cost of goods sold and breakeven
• What margins are available?
• What is the balance between in-store sales lift
  and fuel margins?

13
What influences fuel prices?
14
Prices Follow Seasonal Trends
15
Demand Drives Seasonality
16
Crude Oil Drives Retail Prices
17
Crude Drives Wholesale
18
Retail Follows Wholesale
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How profitable is fuel retailing?
20
Retail Margin Volatility
21
Slim Average Mark-Up
Year Retail Price Retail Mark-Up of Price
2011 3.51 18.2 cents 5.2
2010 2.78 16.6 cents 6.0
2009 2.34 13.1 cents 5.6
2008 3.25 18.0 cents 5.5
2007 2.79 14.2 cents 5.1
2006 2.57 13.8 cents 5.4
2005 2.27 14.8 cents 6.5
2004 1.84 12.8 cents 7.0
2003 1.56 13.2 cents 8.5
2002 1.35 9.7 cents 7.2
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Conclusion

• Retailers set price based upon
• Competition for price sensitive customer
• Customers shop at 45 mph and will leave for
  pennies
• Store-wide breakeven calculation
• Typically make pennies per gallon
• Cost of Goods Sold
• Changes frequently several times per day
• Does not affect all retailers equally or at same
  time
• Crude oil price is dominant factor in retail
  price

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• John Eichberger
• Vice President, Government Relations
• jeichberger_at_nacsonline.com
• [phone]