Your Source for News and Information
Trump’s Energy Policy
OneYear In Improve Communication
for Supply Availability A Look at FLEETCOR’s
WTI and Brent Crudes
Trans-Atlantic Cousins Turning the Page on the Next Chapter for
F U E L M A R K E T E R S • F U E L R E TA I L E R S • C O M M E R C I A L F U E L S
EDITORIAL STAFF CEO & Group Publisher Gary D. Bevers GBevers@FMNweb.com Editorial Director & Digital Publisher Keith Reid KReid@FMNweb.com Director of Production & Managing Editor Kathy Bevers KBevers@FMNweb.com Industry Analysts/Editors Frank M. Hunter FHunter@FMNweb.com Nancy Yamaguchi, Ph.D. NYamaguchi@FMNweb.com Columnists and Contributors
A note from
Gary Bevers, Group Publisher I am very optimistic and looking forward to 2018. It’s an exciting time to be in the fuels business or any other U.S.-based business under the Trump administration. Last year at this time I wrote… “If you are feeling bullish on the prospects of the oil and gas industry under the Trump presidency, you have good reason to be. Trump campaigned and then came into office with an overall pro-business stance that carries over to be even more bullish when he begins to talk about America’s energy sector.” And with Trump, unlike promises made during campaigns by most candidates for President,
he is clearly keeping his commitments to the voters that put him into office. What a novel
concept in today’s world.
Shane Dyer John Eichberger Doug Haugh Corey Henriksen Maura Keller
He and his cabinet have spent their year curtailing EPA overreach, rolling back Obama-era regulations, restrictions and executive orders, shortening the time frame for drilling permits and finally opening up exploration and drilling on federal lands as well as Alaska, the Gulf Coast and almost all offshore federally-controlled waters off every coast of the U.S.
Alan H. Levine Joseph H. Petrowski
I addressed several conferences this past year where I appropriately branded Trump “The
W. Brian Reynolds
Energy President,” and, as I stated last year, the first openly proactive, pro-energy president
Fred M. Whitaker
since Dwight D. Eisenhower.
Editorial Board Ed Burke Lisa Calhoun George A. Overstreet, Jr. Joseph H. Petrowski Art Director Jeff Beene JBeene@FMNweb.com Marketing Director Joe A. Martinez JMartinez@FMNweb.com Digital Editor Scott A. Croom SCroom@FMNweb.com Advertising Representative Bill Kaprelian 262-729-2629 BKaprelian@FMNweb.com Mailing Address 15201 Mason Road, Suite 1000-288 Cypress, TX 77433 www.FuelsMarketNews.com © Copyright 2018, FMN Media, LLC All Rights Reserved
If you read Keith Reid’s Policy Brief in this issue “Trump’s Energy Policy One Year In” beginning on page 6, you will learn the details on the initiatives the Trump administration has both started and accomplished for the Oil & Gas and Petroleum industries in just one short year! So, for my part, here’s looking forward to the next three years of energy freedom and another four years after that. As always, our goal at Fuels Market News is to provide you with valuable information, education and analysis, from the seismic shifts in crude production to the nuances of motor fuels retailing and forecourt technology. In this and every issue of FMN, our energy-expert columnists strive to deliver objective analyses of the facts, changes and trends in our industry, and what that means to you in the fuels industry. As we continue to offer new, value-added fuel-related services to our publication, we promise to work hard to make sure you have every reason to make us your go-to news source for motor fuels buying, supply and technology for wholesale and retail fuel marketers, fuel retailers and commercial fuels segments of our industry. Register for our e-newsletters at www.FuelsMarketNews.com to get in the loop as new content gets posted. Registration is free, and the process is short and easy.
TABLE OF CONTENTS
Like the Idea of Alternative-Fuel
FUELS & SUPPLY
Trump’s Energy Policy One Year In by Keith Reid
Fuel Taxes are the Red Meat in the Wolf’s Lair by Joe Petrowski
New ATRI Research Provides Clear Guidance on Infrastructure Investments
WTI and Brent Crudes: Trans-Atlantic Cousins Re-examine their Relationship by Dr. Nancy Yamaguchi
Consumers Like the Idea of Alternative-Fuel Vehicles by Keith Reid
Moving the Industry Forward by Mark Murrell
WEX Shares Disaster Preparedness Advice by Keith Reid
To Lease or Buy Your Trucks by Maura Keller
WHOLESALE & FLEET OPERATIONS
Industry Forward 46
Preparedness Advice 62
Communication for Supply Availability
RETAIL OPERATIONS Turning the Page on the Next Chapter for Retail Fuel by Joe O’Brien
A Look at FLEETCOR’s Strategic Expansion by Keith Reid
It’s Time to Phase Out Out-Dated Phase Separation Detection Devices by Brian Derge
Improve Communication for Supply Availability by Doug Mihal and Shalee Stockstill
Turning the Page on the Next Chapter for Retail Fuel
by Keith Reid
Trump’s Energy Policy
A year into the Trump presidency is a good
The Trump administration is most certainly a fan of fossil fuels, but while working to reverse some of the Obama administration’s most onerous regulatory and policy actions, it still supports renewables (even wind and solar), though not at levels seen previously.
time to take a look at how well his actions in American energy policy have lived up to his campaign rhetoric. Although by the time this article is read any number of developments might have occurred related to the issues.
For example, the recent tax reform bill still supports tax credit offsets for electric vehicles, wind and solar. Under previous legislation the wind and solar tax credits will be phased out by 2020 and 2022 respectively. As part of his broader trade policy (and initiated by a failed U.S. solar panel manufacturer) a tariff of 30% will be applied to foreign-produced solar panels.
Trump ran as an “all of the above” supporter for the range of domestic energy options. He supported fracking, controversial pipeline development, oil drilling (offshore and on public lands), renewable energy (most specifically biofuels) and an equal footing for coal and nuclear for electricity generation. So far, he has generally delivered (or worked toward) his platform.
Where electric vehicles are concerned, the $7,500 vehicle tax credit is still in place. That begins a phase out when the manufacturer reaches 200,000 vehicles sold. Fuels Institute Director John Eichberger stated in a previous FMN interview how the loss of that credit would have been critical to the progress of electric vehicles. “I think that would have been catastrophic—not for Tesla,” he said. “For your Model S customer $7,500—who cares? But your Model 3, your Nissan Leaf your Chevy Volt—for those guys that $7,500 is a deal breaker. The economics are critical.”
The Obama administration talked a good game on supporting U.S. energy development, and certainly accepted credit for the economic benefits that occurred due to the fracking revolution while simultaneously working to stunt—if not derail—those developments. It is not controversial to say that fossil fuels did not have a friend in the White House. On the other hand, extremist environmental groups and alternative energy companies never had a better friend in the White House. FMNMagazine
Where carbon reduction is concerned, the Trump administration has taken not just a step, but a leap back from Obama-era policies. For example, he withdrew the U.S. from Obama’s non-treaty Paris Accords (COP21). As noted in a previous Policy Brief, Trump’s rationale for pulling out of the agreement mirrored common themes from the campaign. In his speech on June 1, he noted that the accord would be costly to the U.S. economy, citing an impact of 2.7 million lost jobs by 2025, including 440,000 manufacturing jobs, as reported by the National Economic Research Associates (NERA). In addition, the same study predicted that by 2040, paper production would be down by 12%, cement by 23%, iron and steel by 38%, coal by 86% and natural gas by 31%. “The cost to the economy at this time would be close to $3 trillion in lost gross domestic product (GDP) and 6.5 million industrial jobs, while households would have $7,000 less income and, in many cases, much worse than that,” Trump said. Trump also fell back on another campaign mainstay: that this accord was poorly negotiated. Most of the treaty’s impact would be felt by the developed Western nations—the U.S. at the forefront—which by and large are already green in their production and use of energy. A related effort was the Trump administration’s decision to rescind the Clean Power Plan—the Obama Administration’s primary tool to force drastic adjustments to the current energy infrastructure. As previously covered in several Policy Briefs, the Clean Power Plan aimed to reduce carbon dioxide emissions by 32% from 2005 levels by 2030. It basically provided a framework to move power generation away from coal to renewables with the support of natural gas as a bridge fuel. From a procedural standpoint, the Trump administration can’t simply cancel the rule. The path of least resistance involves basically rewriting and replacing the rule. “The Obama administration pushed the bounds of their authority so far with the CPP that the Supreme Court issued a historic stay of the rule, preventing its devastating effects to be imposed on the American people while the rule is being challenged in court,” said EPA Administrator Scott Pruitt. “We are committed to righting the wrongs of the Obama administration by cleaning the regulatory slate. Any replacement rule will be done carefully, properly, and with humility, by listening to all those affected by the rule.” There is some speculation that the Trump administration will not introduce, or perhaps just “slow walk” any replacement. There should be no speculation over environmental groups fighting this in court. “Trump can’t reverse our clean energy and climate progress with the stroke of a pen, and we’ll fight him and Scott Pruitt in the courts, in the streets, and at the state and local level across America to protect the health of every community,” said Sierra Club Executive Director Michael Brune. Another target for the Trump administration is the 2016 Transportation Clean Air Rule. This requires set two- or four-year emission reduction targets. The goal is to leverage states into FMNMagazine
“We are committed to righting the wrongs of the Obama administration by cleaning the regulatory slate. Any replacement rule will be done carefully, properly, and with humility, by listening to all those affected by the rule.”
EPA Administrator Scott Pruitt
prioritizing mass transit or zero-emission solutions instead of automobiles burning gasoline or diesel. An attempt to repeal this rule ran into legal hurdles and it remains in effect. However, the administration is looking to rewrite the rule. The U.S. EPA has long been heavy on environmental activism over economic impact at the staff level and the eight years of the Obama administration only amplified that (though many of these staffers are leaving the agency under its new leadership). While proponents of the most aggressive and economically destructive climate change policies say the “science is settled,” that is demonstrably false, even among groups of scientists that actively support the impact of human influences. For example, a recent study from the University of Exeter published in Nature journal still supported global warming but noted that it’s not likely to be worst-case scenario extreme. There have been a number of other studies that promote this position from scientists that are not generally skeptical about human influence. Some even posit that global warming would be net beneficial to society. While most still note a need for remedial action, if the outcome of climate change is not the most destructive scenarios imaginable, does the solution have to be the most destructive economically? EPA Administrator Scott Pruitt plans on having an open assessment of current climate science featuring experts from all sides of the issue. As noted there are more than a few credible scientific voices that provide alternative outlooks for what is primarily influencing climate change (human or natural, cyclical process) or the severity of that change if humans are the drivers.
POLICY BRIEF Also linked to carbon policy are the CAFE standards. Trump was approached by automakers to review the current Corporate Average Fuel Economy standards. The latest Obama-era rules set fuel economy goals of 35.5 mpg by 2016 and 54.5 mpg on cars and light-duty trucks by model year 2025. Automakers claimed the process was rushed to get stringent requirements in place before the change of administration. They also note it was more in tune to pre-fracking fuel prices and consumer habits. Mitch Bainwol, President & CEO, Auto Alliance, stated the following: “Auto manufacturing is highly competitive, so seldom do the world’s automakers come together. But they did in February, when 18 automakers wrote President Trump. They were united in their support for putting ‘the process back on track’ without predetermining any outcome. Checking prior assumptions against new market realities. Driven by current data.
“Auto manufacturing is highly competitive, so seldom do the world’s automakers come together. But they did in February, when 18 automakers wrote President Trump [regarding CAFE standards]. They were united in their support for putting ‘the process back on track’ without predetermining any outcome. Checking prior assumptions against new market realities. Driven by current data.”
“President Trump agreed, and now we will get back to work with EPA, National Highway Transportation Safety Administration (NHTSA), California Air Resources Board (CARB) and other stakeholders in carefully determining how we can improve mileage and reduce carbon emissions while preserving vehicle safety, auto jobs and affordable new cars and trucks.”
Other Obama legislative initiatives of interest to the industry have been opposed by Trump but are still proceeding due to the fact that they made it through the EPA rulemaking process and have enhanced legal protection.
The EPA’s 2015 ozone rule, previously covered in several Policy Briefs, set a ground ozone level of 70 parts per billion (ppb) just 7 years after it was set to 75 ppb. It is estimated that one third of the counties in the U.S. would become non-attainment areas, including some nature preserves with little to no human activity. The impact on manufacturing in non-attainment areas is expected to be significant in the billions- to trillion-dollar range. For the fuels industry, it means more reformulated gasoline requirements and Reid vapor pressure (RVP) issues in those areas. “Evidence shows that ambient ozone levels are declining. Implementing both the 2008 and 2015 standards creates unnecessary complexity and inefficiency, in addition to needlessly burdening the states and businesses with potentially enormous costs to implement dual standards and competing timelines,” stated Howard J. Feldman, American Petroleum Institute’s (API’s) senior director for regulatory and scientific affairs. After initially attempting to delay the rule for a year, a lawsuit push from 16 progressive state attorneys general saw the Trump EPA commit to allowing the rule to proceed. “The EPA’s hasty retreat shows that public health and environmental organizations and 16 states across the country were right: the agency had no legal basis for delaying FMNMagazine
President & CEO, Auto Alliance
implementation of the 2015 smog standard,” said Seth Johnson, an attorney with Earthjustice. “Implementing the safer 2015 smog standard will mean cleaner air and healthier people, particularly for those most vulnerable to ozone, like children, people with asthma and the elderly.”
However, citing complexities in the rule, EPA has been slow to identify the new non-attainment areas. This delay has been met with 14 lawsuits this December from the same pool of states.
The Trump administration is currently committed to the Renewable Fuel Standard, much to the disappointment of API that would like to see the RFS severely limited if not repealed.
One RFS issue of note was a less political and more interindustry move to change the point of obligation from importers and refiners to fuel marketers. This was supported by some refiners and opposed by the range of industry associations from NACS and SIGMA to API. EPA did not end up making the change, although some observers expressed concerns that Trump supporter and refinery owner Carl Icahn might have influence over the decision.
The more political decisions hinged on the biofuel volume obligations which can be seen as a metric on the administrative support or disapproval of biofuels. The Republican Party has not been a natural friend of the RFS (outside of those representing farm states) and especially small government conservatives like Senator Ted Cruz. Trump is said to have personally intervened to minimize initial rollback efforts at EPA. It’s been reported that EPA was considering across the board volume reductions and including exported renewable fuel volumes as part of the domestic totals. FuelsMarketNews.com
Trump’s Energy Policy One Year In
“EPA Administrator Pruitt has disappointed the biodiesel industry for failing to respond to our repeated calls for growth. These flat volumes will harm Americans across several job-creating sectors—be they farmers, grease collectors, crushers, biodiesel producers or truckers—as well as consumers.”
Chief Operating Officer of the National Biodiesel Board
By and large, the administration has supported corn ethanol. “ACE members are very pleased that the statutory 15-billiongallon volume for conventional biofuel will be maintained in 2018 and that EPA is increasing the advanced biofuel volume to 4.29 billion gallons,” said Brian Jennings, CEO of the American Coalition for Ethanol. “This represents a modest step in the right direction for the RFS in 2018. Beyond sending a generally positive signal to the rural economy, increased blending targets also reassure retailers that it makes sense to offer E15 and flex fuels to their customers.” Not so much for cellulosic ethanol.
“While the 288 million gallons of cellulosic biofuel EPA is calling for in 2018 is a small increase from the volume proposed earlier this year, it is disappointing. The 2018 volume represents a decrease from the 2017 cellulosic biofuel level of 311 million gallons,” Jennings said. “We firmly believe the technology exists to increase cellulosic biofuel targets.” Biodiesel producers were also less pleased, though you could argue it’s a glass half full/half empty situation. While the volumes for 2018 and 2019 showed no significant cuts, they showed no significant increases either. “EPA Administrator Pruitt has disappointed the biodiesel industry for failing to respond to our repeated calls for growth. These flat volumes will harm Americans across several jobcreating sectors—be they farmers, grease collectors, crushers, biodiesel producers or truckers—as well as consumers,” said Doug Whitehead, chief operating officer of the National Biodiesel Board. “Nevertheless, we can’t thank our members and our biodiesel champions at the state and federal levels enough for their tireless advocacy and education efforts. We’ll continue to work with the administration to right this wrong for future volumes.”
Initial Trump efforts delay the Obama methane rule, focused on capturing methane that is currently flared at many well sites, have encountered legislative challenges. The goal is to eventually review and revise the rule. More success was found with the repeal of the Obama administration’s rule on hydraulic fracturing, which set separate and more stringent requirements for sites on federal and tribal lands compared to those required for state and private lands.
On the proactive side (vs. reacting to previous regulations) was the opening of the Alaska’s Arctic National Wildlife Refuge to oil development as part of the major tax overhaul. This is an issue that has been bubbling for decades. Opponents paint a picture of vast devastation and imperiled caribou migrations. Proponents argue that the well footprint is minimal and that long-used technologies (Alaskan oil development is a mature and largely environmentally successful operation) eliminate such concerns.
On January 4 the Trump administration announced it was significantly expanding the offshore continental shelf to oil exploration and production. This includes areas in the Northeast and off California that have been blocked for decades. FMN columnist and former Gulf CEO Joe Petrowski noted a number of reasons why this is important in a recent article. In a nutshell though: “While shale oil has been a game changer, it’s downside is a steep decline curve once production starts, so access to offshore will keep the U.S. crude production curve ascending for the foreseeable future.” States have considerable sway over activities offshore (especially the first three miles) and certainly over shore-based touchpoints for offshore operations. States with considerable beach-focused tourism, like Florida, are not big fans of potential oil spills. Florida has raised objections and been given an exemption. As might be expected, California and some of the Northeast states are not warm to the idea for both tourism objections and ideological reasons. Where pipeline logistics concerned, the Keystone XL pipeline and the Dakota Access Pipeline have both been approved after being held up by the Obama administration under pressure from the environmental base. As usual, there are lawsuits filed by environmental groups. There is also some uncertainty over the Keystone XL pipeline after the deal, with lower oil prices and a leftist leadership in Canada. n
The $1 biodiesel tax credit, which expired in 2016 and is supported by a range of industry associations, has yet to be renewed. However, that fight continues aggressively in Washington. FMNMagazine
Drill Baby Drill
READ MORE at FuelsMarketNews.com 10
Fuel Taxes are the Red Meat in the Wolfâ€™s Lair FMNMagazine
FUELS & SUPPLY
by Joe Petrowski
With all of the talk on tax reform
not much focus has been placed on the largest source of government revenue, and that is the motor fuel taxes (state, federal and local). In fact, with all the Republican giddiness over
…the government needs to “find” $1 trillion from the “other” category unless we want to see the annual deficit and cumulative debt grow to unsustainable and economy threatening levels (especially as interest rates rise).
With tax collection from corporate, income and payroll taxes decreasing $700 billion—even at 3.5% growth—and federal expenditures destined to increase $500 billion (defense, infrastructure, entitlements) the government needs to “ﬁnd” $1 trillion from the “other” category unless we want to see the annual deﬁcit and cumulative debt grow to unsustainable and economy threatening levels (especially as interest rates rise). The motor fuel industry is the fat piñata in the room.
corporate taxes, they contributed less than $1 trillion per year while individual income taxes contributed $1.6 trillion and payroll $1.2 trillion. Motor fuel alone contributes $8.9 trillion between state and federal, and in some cases, local taxes. Now, most of that $8.9 trillion is supposed to go into the highway trust fund to build and maintain roads, bridges and other transport infrastructure (and if you think those funds are segregated for that use, I have a phantom bridge to nowhere for sale). The reality is that annual government expenditures are roughly $4.5 trillion while total tax collected is roughly $3.4 trillion, consisting of:
• Income taxes $1.6 trillion • Payroll $1.2 trillion
• Corporate $0.3 trillion • Other $0.26 trillion
And it is not a Willie Sutton argument (“That is where the money is”), but remember:
• Oil companies are rich and evil (or am I being redundant)
• Our planet is dying
(might be true but I blame stupid leadership more than CO2)
• It is a tax easy to collect and essentially invisible, unlike your pay stub, April 15 or the estate tax
• It is fair because everyone pays it and there is no division between rich and poor, race, age or sexual orientation, etc. We have not had a raise in federal and most state fuel taxes for several years—as if that is a persuasive reason for a tax raise. (Gosh, you have not been punched in the nose since high school—how about you experience it for old times’ sake?) So, with 190 billion gallons of diesel and gasoline being consumed each year generating $8.9 trillion, the state, feds and locals are contributing 46 cents per gallon—18.4 from federal and the balance from state, county and local.
(Do you want to guess where some of this comes from? It is not park fees and import levies!)
FUELS & SUPPLY
Fuel Taxes are the Red Meat in the Wolf’s Lair
The ﬁrst federal excise tax was imposed in 1932 and was 1 cent per gallon (called temporary by the usual Washington comedians), and interestingly, it was not to fund roads or infrastructure, but to pay down the deﬁcit caused by the depression. Hoover foolishly raised many taxes to balance the deﬁcit causing a worse economic downturn in 1933 – 1935, which made him shortly an ex-President. Subsequent increases in the federal excise tax were for ﬁscal reasons mainly funding wars (in 1940 in anticipation of WWII and in 1951 for the Korean War). They would have gone up further in WW2 but with rationing in eﬀect on fuel, with no new consumer vehicles or tires, even the government was smart enough to recognize this would not raise revenue. There is little doubt fuel taxes are headed up and in addition to the reasons previously outlined, an argument can be made that today’s federal tax of 18.4 cents is in real dollars the same as 1 cent in 1932 (1 cent in 1932 is 17.6 cents today, but as they say, “close enough for government accounting.” There is little doubt federal tax on gasoline will go to 25 cents/gallon with the following arguments being made:
• On parity with diesel
• Only 50% higher in real terms than 1 cent in 1932
More critically this will give the go-ahead to many states facing high debt loads and annual deﬁcits to raise their own fuel taxes. Adding in whether a state is blue or red gives you the following probability of a fuel tax increase by state:
Low Probability Nebraska Tennessee Indiana Virginia S Dakota Florida Wyoming Iowa N Dakota Idaho Utah Arizona
(that our government refuses to recognize is over, as evidenced by “blend wall” myopia)
• Federal Reserve will applaud, given their concern over the tax bill induced fiscal stimulus as interest rates are rising
NY Missouri Massachusetts Maryland Louisiana California Maine Michigan Rhode Island Illinois Connecticut New Jersey Ohio West Virginia
Pennsylvania will see a gas tax increase, but at $1/gallon and on, they are hopefully satiated on diesel tax. An important issue for the petroleum motor fuel industry is how to tax electric cars and natural gas vehicles so that tax neutrality among fuels is embraced. This probably sentences my friend (association attorney) Tim Columbus and others representing petroleum retailers to long excruciating hours at the department of Weights and Measures, and like all taxes, launch a drive for exemptions and credits for some operators and shippers. Tax simpliﬁcation is like “dry water”— an oxymoron that only a bureaucrat could cling to. n
• Lower than 50% of state gasoline taxes
• Will raise $20 billion per year or 1 trillion over 10 years given growth in transport
READ MORE at FuelsMarketNews.com
Joe Petrowski Joe has had a long career in international commodity trading, energy and retail management and public policy development. In 2005, he was named President and CEO of Gulf Oil LP and elected to the Gulf Oil LP Board of Directors. In October 2008, he was named CEO of the now combined Gulf Oil and Cumberland Farms, whose annual revenues exceed $11 billion and who now operates in 27 states. In September 2013, Petrowski stepped down as CEO of The Cumberland Gulf Group. He is now the Managing Director of Mercantor Partners, a private equity firm investing in convenience and energy distribution. Joe is also a member of the Gulf, Yesway and Green Print, LLC boards.
New ATRI Research Provides Clear Guidance on Infrastructure Investment T
he American Transportation Research Institute (ATRI) has released its muchanticipated assessment of the nation’s transportation investment options. The report entitled A Framework for Infrastructure Funding concludes that the only meaningful mechanism for attaining the administration’s vision for a large-scale infrastructure program is through a federal fuel tax increase. The inefficiency of other mechanisms, including mileage-bas ed user fees and increased tolling, will fall far short of the needed revenue stream without placing undue hardship on system users. In addition, ATRI’s research documents that a federal fuel tax increase will incentivize states to generate multi-million dollar matches to the new federal funds, ultimately moving the United States closer to the infrastructure investment goals proposed by both Congress and the President.
“Maybe the most important and “Maybe the most important and unexpected benefit of a unexpected benefit of a federal fuel tax increase is the hundreds of thousands federal fuel tax increase is the of new, high-paying construction jobs that will be hundreds of thousands of new, highproduced,” said Dennis Dellinger, President of paying construction jobs that will be Cargo Transporters. “We often assume that the produced. We often assume that the only reason to only reason to raise the fuel tax is to lay more raise the fuel tax is to lay more asphalt and concrete. asphalt and concrete. Forgotten in the mix is Forgotten in the mix is that tax revenues can simultaneously produce good roads and that tax revenues can simultaneously produce good jobs.” good roads and good jobs.”
Dennis Dellinger President of Cargo Transporters
FUELS & SUPPLY
New ATRI Research Provides Clear Guidance on Infrastructure Investment
The report further documents the consequences of continuing with the “do-nothing” option. The federal fuel tax has not been raised in more than two decades, resulting in significant costs to system users, particularly the trucking industry. While the trucking industry contributes more than $18 billion in federal user fees each year, growing traffic congestion and freight bottlenecks now cost the industry more than $63 billion annually. The report also indicates that growth of e-commerce will likely slow as freight deliveries fail to meet the real-time demands of U.S. consumers. Other key ATRI findings and recommendations include the following considerations. • A newly created federal vehicle registration fee would be the most efficient mechanism to fill funding gaps associated with electric vehicle use. These fees could be seamlessly implemented using the same systems as those successfully used to collect state registration fees. • A bureaucracy as large as the IRS would be required to collect, manage and enforce a national vehicle-miles traveled (VMT) tax on the more than 250 million vehicles registered in the U.S. Additionally, mileage tax evasion would likely skyrocket under a program that can’t “see” non-paying users.
• In terms of secondary benefits from a fuel tax focus, ATRI’s findings suggest that every U.S. state would experience significant employment gains as a result of a 10 or 20 cent federal fuel tax increase. In total, states would receive between $15 billion and $30 billion or more annually through a federal fuel tax increase; nearly half a million jobs could be created nationwide with a 20-cent federal fuel tax increase. • According to the literature and public polling data, American taxpayers prefer a federal fuel tax over other funding mechanisms when the revenue is dedicated to transportation infrastructure. “ATRI’s research corroborates what many of us have espoused in Washington DC and in every state capital: people are demanding action on transportation investment and the federal fuel tax is the ideal tool for delivering the much-needed funding,” said Chris Spear, ATA President. n
• The practice of road tolling continues to be an expensive proposition for collecting highway funds. While several toll systems slightly improved their administrative efficiency, the majority of toll systems FMNMagazine
spend more than ten cents of every dollar collected on administrative activities. Many systems are losing money, and almost all privatized toll roads in the U.S. have filed bankruptcy. Finally, ATRI’s analysis found that many toll authorities have modified their public financial statements to increase complexity and decrease transparency of revenue management, which ultimately masks the inefficiency of toll roads.
READ MORE at FuelsMarketNews.com 18
WTI and Brent Crudes: Trans-Atlantic Cousins
Relationship Why transportation fuel sellers and buyers should care about the relationship between WTI and Brent Crudes by Dr. Nancy Yamaguchi
Introduction: Why fuel buyers and sellers should watch crude prices Crude oil is the largest commodity in global trade, and oil prices are arguably the most intently watched prices in the world. For fuel buyers, however, there is a gulf between international crude prices and day-to-day prices for the diesel and gasoline they purchase. There are so many types of crude oil, and the ups and downs in crude prices do not have an immediate, one-for-one, impact on refined fuel prices. Why is it important to watch crude prices? Oil traders, hedge fund managers, speculators and day traders follow crude prices and price differentials every minute of every day that markets are open. Fuel buyers and sellers may not follow crude prices as closely, but crude prices, more than any other single factor, determine product prices. Crude oil prices are the largest component of refined fuel prices. The two infographics below were provided by the United States Energy Information Administration (EIA.) In October 2017, the fully built up retail price of regular gasoline was $2.51/gallon, 50% of which was the cost of crude. Refining costs accounted for 17% of the cost, distribution and marketing contributed 14% to the cost, and taxes added 19% to the cost.
FUELS & SUPPLY
WTI and Brent Crudes: Trans-Atlantic Cousins Re-examine their Relationship
The fully built up retail price of diesel was $2.79/gallon, 45% of which was the cost of crude. Refining accounted for 20% of the cost, distribution and marketing 16%, and taxes 19%. Naturally, the closer the buyer is to the refiner (with prices set before taxes, distribution and marketing costs are added), the larger the share of crude oil is in the fuel price. Therefore, while crude prices and product prices can diverge from day to day and from submarket to submarket, they cannot diverge too wildly and for too long. Imagine a swimmer swimming against the tide. It can be done, for a time, but less forward progress is made if the ocean is going the other way. If diesel prices are rising while crude prices are ebbing, eventually diesel prices will follow crude prices. There are hundreds of crude oils traded, but two key crudes have emerged as the benchmarks for Trans-Atlantic pricing: West Texas Intermediate (WTI) in the U.S. and Brent Blend in Europe’s North Sea. Both are light (low in specific gravity) and sweet (low in sulfur) crudes. In terms of quality, WTI and Brent are relatively close. We may liken them to Trans-Atlantic cousins serving as benchmarks in their respective markets. Contracts for the purchase of many other crudes often are based on discounts or premia relative to these benchmark crudes. The price gap, or differential, between WTI and Brent is closely watched as a barometer of TransAtlantic crude supply and demand. When WTI prices stray too far above Brent prices, this eventually stimulates movement of crude to the Americas. Conversely, having Brent prices too far above WTI prices stimulates movement of crude to Europe. Both WTI and Brent prices impact U.S. fuel prices. The U.S. market is firmly tied to the global market, and despite the immense gains in U.S. crude production since the advent of the Shale Boom, the U.S. remains a net importer of crude oil. During the first three quarters of 2017, the U.S. imported 7.99 million barrels per day (MMbpd) of foreign crude, while exporting 0.96 MMbpd of crude to foreign destinations. To place this in context, the amount of crude imported by the U.S. is larger than the amount of oil consumed in all of the countries in South and Central America combined.
Regular Gasoline (Oct. 2017) Retail Price: $2.51/gallon Taxes
Marketing & Distribution
Diesel (Oct. 2017) Retail Price: $2.79/gallon Taxes
Marketing & Distribution
This article explores WTI and Brent crudes, their qualities and their price relationship. Crude prices have been moving dramatically, and the price differential between WTI and Brent has changed. These Trans-Atlantic cousins are re-examining their relationship. FMNMagazine
FUELS & SUPPLY
WTI and Brent Crudes: Trans-Atlantic Cousins Re-examine their Relationship
History of the WTI-Brent Price Diﬀerential The international market has been accustomed to seeing WTI and Brent prices track one another closely, with WTI prices at a premium. The chart below shows the WTI-Brent price differential calculated from monthly average spot prices as reported by the EIA. Between 1987 and 2004, the WTI-Brent price differential averaged around $1.50/b. Crude prices and the WTI-Brent relationship became much more volatile thereafter. Crude prices climbed dramatically, and in 2008, WTI prices skyrocketed above $133/b while Brent prices went over $132/b.
The Shale Boom was underway, and U.S. crude production rose by over 4.4 MMbpd between 2008 and 2015. The price spike was followed by a slump. Oversupply in the U.S. drove U.S. prices down relative to global prices, and the WTI-Brent differential went as low as -$27/b in 2011. By the end of 2013, Saudi Arabia began to boost production to drive U.S. shale producers out of the market. The oil price war drove prices down, and the WTI-Brent differential narrowed.
WTI–Brent Price Differential, $/b
Source: Author’s calculations and estimates
FUELS & SUPPLY
WTI and Brent Crudes: Trans-Atlantic Cousins Re-examine their Relationship
WTI and Brent Crude Quality: A Gross Product Worth Comparison During the years when WTI prices steadily surpassed Brent prices, it was commonly accepted that WTI was worth more because it was lighter and lower in sulfur. WTI crude is noted as having an American Petroleum Institute (API) gravity of 40.8 degrees and a sulfur content of 0.34% by weight. Brent Blend is noted at 40.1 API and 0.347% sulfur by weight. Crude qualities will vary over time, since the streams are blended, but WTI and Brent are quite close in quality according to these two simple measures. Individual refineries will place more or less value on them as feedstocks depending on a variety of factors, including their overall feedstock diet, their technology in place and the market they serve.
During the years when WTI prices steadily surpassed Brent prices, it was commonly accepted that WTI was worth more because it was lighter and lower in sulfur.
higher yield of vacuum gasoil to be used as feedstock for catalytic crackers and hydrocrackers, while Crude B has a higher yield of vacuum bottoms. Most sophisticated refineries would prefer Crude A.
Two crudes with identical API gravities and sulfur contents may differ significantly in their attractiveness to a specific refinery. For example, the weight percent of the sulfur may be identical, but the sulfur levels in specific cuts of the crude may vary. Imagine that Crude A has an unusually high concentration of sulfur in its diesel-range material, while most of the sulfur in Crude B is locked into its heaviest vacuum residue. Most refineries striving to create essentially sulfur-free diesel would favor Crude B. As another example, imagine that Crude A and Crude B have the same API gravity, but Crude A provides a
As a simple example of crude value, consider this gross product worth, or GPW, buildup of WTI and Brent. This takes the percentage yields of the main streams upon atmospheric distillation and multiplies them by the value of the commodity. Three price cases are examined, devised by the author to be consistent with WTI and Brent spot prices in October 2017, which were reported by the EIA at $51.58/b and $57.51/b respectively ($1.23/gallon and $1.37/gallon.)
WTI and Brent Crudes: Examples of Gross Product Worth Assumed yields on distillation, % Brent WTI
LPG 2.9 2.7
Naphtha Kerosene Gasoil Fuel Oil Total 30.5 15.6 16.7 34.3 100 32.4 23.5 8.1 33.3 100
LPG Price assumption, case 1 $1.02 GPW Brent $57.51/b or $1.37/gal $0.03 GPW WTI $51.58/b or $1.23/gal $0.03
Naphtha $1.32 $0.40 $0.43
Kerosene $1.49 $0.23 $0.35
Gasoil Fuel Oil $1.54 $1.13 $0.26 $0.39 $0.12 $0.38
Total GPW GPW-Crude cost $6.50 $1.31 $(0.06) $1.31 $0.08
LPG Price assumption, case 2 $1.12 GPW Brent $57.51/b or $1.37/gal $0.03 GPW WTI $51.58/b or $1.23/gal $0.03
Naphtha $1.22 $0.37 $0.40
Kerosene $1.24 $0.19 $0.29
Gasoil Fuel Oil $1.79 $1.23 $0.30 $0.42 $0.14 $0.41
Total GPW GPW-Crude cost $6.60 $1.32 $(0.05) $1.27 $0.04
LPG Price assumption, case 3 $0.92 GPW Brent $57.51/b or $1.37/gal $0.03 GPW WTI $51.58/b or $1.23/gal $0.02
Naphtha $1.57 $0.48 $0.51
Kerosene $1.59 $0.25 $0.37
Gasoil Fuel Oil $1.34 $0.88 $0.22 $0.30 $0.11 $0.29
Total GPW GPW-Crude cost $6.30 $1.28 $(0.09) $1.31 $0.08a Source: Author’s calculations and estimates
FUELS & SUPPLY
WTI and Brent Crudes: Trans-Atlantic Cousins Re-examine their Relationship In price case #3, a higher value is given to naphtha and kerosene. Brent’s GPW decreases to $1.28, which is $0.09 less than the crude cost of $1.37/gallon. WTI’s GPW is $1.31, which is $0.08 above the crude cost of $1.23/gallon. This is a simple approach, but it sheds light on how crude quality can affect refinery economics. More detailed refinery modeling would better capture the differences between Brent and WTI. For example, a refinery model could be built of a typical U.S. refinery using WTI crude to meet a U.S. pattern of refined product demand. A refinery model could be built of a typical European refinery running Brent crude to meet a European pattern of demand. Still, the simple GPW approach suggests that the large price premium currently accorded to Brent crude is not warranted by its quality relative to WTI. The explanation must lie elsewhere. The following paragraphs discuss how the WTIBrent price relationship has been affected by:
In price case #1, the GPW of both crudes is $1.31. Since WTI costs only $1.23/gallon, the net value, or profit, is $0.08. Since Brent costs $1.37/gallon, the net is negative $0.06. In other words, in this GPW approach, a gallon of WTI run through an atmospheric distillation tower will net a profit of $0.08, but running a gallon of Brent crude will lose $0.06.
• The changes in the U.S. crude slate • The change in the North American supply-demand balance versus the European and Eurasian supply-demand balance, and
In price case #2, a higher value is given to diesel and fuel oil, and Brent’s GPW rises to $1.32, and WTI’s GPW falls to $1.27. Still, the price premium given to Brent results in a negative GPW-Crude cost of $0.05, whereas WTI’s GPW of $1.27 is $0.04 above the crude cost of $1.23/gallon.
• The internal logistics of crude transport in the U.S.
FUELS & SUPPLY
WTI and Brent Crudes: Trans-Atlantic Cousins Re-examine their Relationship
The Change in Supply-Demand Balance, North America vs Europe/Eurasia
The inﬂux of light, sweet crudes has changed the U.S. crude slate, and the value of light sweet crudes has diminished slightly relative to the heavy, sour crudes that U.S. reﬁneries had geared up to use.
The Changing U.S. Crude Slate
As noted, light sweet crudes typically are more expensive than heavy sour crudes. In the U.S., the refining industry assiduously upgraded their facilities to accommodate a heavier, sourer crude slate. By adding technological sophistication, the cost of the crude feedstock could be reduced. It was generally accepted that heavy sour crudes would remain abundant and cheap. In 1985, crude inputs to U.S. refining averaged 0.91% sulfur and 32.5 degrees API. The slate grew steadily heavier, and the API gravity declined to 30.2 degrees in 2004 and 2005. The sulfur content crept up to 1.42% by 2005. By this point, however, U.S. crude production was rising, and the new light tight oils (LTOs) from shale plays were changing the average crude slate. The sulfur content stopped climbing, and it has remained flattish between 2005 and 2017 (January – September average data). The downward trend in API gravity reversed, and it has risen to 31.8 degrees during the January – September 2017 period. The influx of light, sweet crudes has changed the U.S. crude slate, and the value of light sweet crudes has diminished slightly relative to the heavy, sour crudes that U.S. refineries had geared up to use.
Another key determinant of the relative value of WTI crude versus Brent crude is the regional supply-demand balance. North America is a major net importer of oil, and the world expected its net import requirements to continue to grow. The accompanying figure uses British Petroleum’s (BP’s) data on oil demand minus oil production as a rough estimate of North American and European/Eurasian net import requirements from 1965 through 2016. In the years before the oil price shocks of the 1970s, net import requirements were soaring in both regions. The price shocks caused demand to fall and production to rise, cutting into the net import requirement. After the collapse of oil prices in 1986, however, North American demand began to climb, whereas crude production peaked and entered a period of decline. The net import requirement grew from around 4.4 MMbpd in 1986 to over 11.4 MMbpd in 2005. Then, the Shale Boom, plus expanded output in Canada, reversed this. North American demand also has declined over the past decade. Between 2005 and 2016, North America’s net supply gap fell below 4.6 MMbpd, an astonishing drop of 6.8 MMbpd. In contrast, crude production in Europe/Eurasia has been growing steadily for decades, while demand has been declining. The result has been a sustained decline in the net import requirement, which fell from approximately 7.9 MMbpd in 1992 to less than 1.1 MMbpd in 2016. In short, the world expected that the U.S. would continue to purchase more and more crude from the international market. The expansion of regional supply reversed this.
Lighter, Sweeter Crudes Changing the U.S. Crude Slate
North American net oil imports were surging until the Shale Boom, European & Eurasian net imports were falling
Source: U.S. Energy Information Administration (EIA)
FUELS & SUPPLY
WTI and Brent Crudes: Trans-Atlantic Cousins Re-examine their Relationship
The Shale Boom and Internal Crude Logistics
Removal of Restrictions on Crude Exports
The huge upsurge in U.S. production from shale plays placed enormous pressure on oil transport infrastructure. This was compounded by the increase in Canadian production of bitumen-based synthetic crudes and diluted bitumens (dilbits), which are produced mainly in Alberta province. This is north of the Dakotas, where Bakken LTOs already were straining the oil delivery system. The crude pipelines in the area were accustomed to small, locally crude batches, but they were overwhelmed when North Dakota’s crude production jumped from less than 100 thousand barrels per day (kbpd) in 2005 to over 1 MMbpd in 2014. Looking back to Figure 1 illustrating the change in the WTI-Brent price differential, note the huge drop in relative WTI prices in 2011 – 2012. Domestic crudes were being sold at heavily discounted prices during those years. Infrastructure was overloaded, and producers cut prices to get rid of excess inventory.
The regional oversupply of crude in the U.S. was exacerbated by laws in place that severely restricted the exports of domestic crude. The restrictions were commonly referred to as the “crude export ban,” though as accompanying Figure 6 illustrates, the U.S. has exported crude for over a century. The EIA reported that the U.S. exported 13 kbpd of crude in the year 1913. In 1975, following the oil price shock caused by the Arab Oil Embargo, the U.S. enacted severe restrictions on the export of crude oil under the Energy Policy and Conservation Act. Some crude trades were allowed, but others required specific licenses from the U.S. Department of Commerce. In the U.S., pipelines
are the chief mode of transporting crude to reﬁneries. As pipeline capacity was ﬁlled, delivery of domestic crude by non-pipeline modes increased.
In the U.S., pipelines are the chief mode of transporting crude to refineries. As pipeline capacity was filled, delivery of domestic crude by non-pipeline modes increased. According to the EIA, delivery by barge rose by over 500% (from 126 kbpd in 2010 to 669 kbpd) in 2015. Delivery by tank car grew a whopping 30x (from 12 kbpd in 2010 to 365 kbpd in 2014). Delivery by truck more than doubled during that time, rising from 198 kbpd in 2010, to 418 kbpd in 2014, and to 484 kbpd in 2015. By 2014 – 2015, additional pipeline capacity began to come online, and the use of these other modes began to ebb.
Allowing exports also alleviated some of the strain on oil transport. Already, additional pipeline capacity was easing the flow of oil, reducing the need for more expensive transport options. Freeing up the export of U.S. light crudes made seaborne tanker trade more efficient as well, since inbound tankers carrying medium or heavy crudes could sometimes load a backhaul cargo for at least part of the return voyage, rather than steaming back in ballast (with empty cargo tanks).
Deliveries of domestic crude to U.S. refineries, non-pipeline modes, kbpd
U.S. exports of crude oil, 1913 – 2017, kbpd
Source: U.S. Energy Information Administration (EIA)
The restrictions on exports, although not a ban, were a major deterrent to free trade. The restrictions were in place for forty years, and much of the nation’s petroleum infrastructure was built with these restrictions in mind. In 2015, Congress voted to end the restrictions. Crude exports shot up to 591 kbpd in 2016, and they have averaged 960 kbpd during the first three quarters of 2017. Unsurprisingly, the value of WTI crude improved relative to Brent.
Source: EIA. 2017 data are Jan-Sep average
FUELS & SUPPLY
WTI and Brent Crudes: Trans-Atlantic Cousins Re-examine their Relationship
FUELS & SUPPLY
WTI and Brent Crudes: Trans-Atlantic Cousins Re-examine their Relationship
When the U.S. was on its staid course of doing everything the global market expected, WTI tracked its Trans-Atlantic cousin, Brent, quite closely. The price diﬀerential was on a steady course, with WTI favored with a premium based on its slightly more favorable quality. But the steady-state relationship ended.
No more “steady state” for the WTI-Brent price diﬀerential
valuable refinery feedstock than Brent, many other factors are at play that refinery economics cannot explain. Numerous forces beyond just quality weigh upon the WTIBrent relationship: the shale boom, the changing crude slate, the supply-demand balances in regional markets, transport logistics and regulatory requirements. These are large, powerful forces, and they are changing the relationship between the two Trans-Atlantic cousins.
When the U.S. was on its staid course of doing everything the global market expected, WTI tracked its Trans-Atlantic cousin, Brent, quite closely. The price differential was on a steady course, with WTI favored with a premium based on its slightly more favorable quality. But the steady-state relationship ended. The past decade has been enormously eventful. The price spike of 2008 sent crude prices above $130/b. A catastrophic global recession followed. But the high prices fostered the U.S. Shale Boom, bringing over 4 million barrels per day of new supply online in short order. Oil transport infrastructure was overwhelmed, prompting use of non-pipeline modes and a wave of pipeline construction.
Will the differential ever revert back to the steady course with WTI slightly above Brent? Such a thing is not expected in 2018. What are these crudes really “worth” relative to one another? As the Latin writer Publilius Syrus in the first century BC noted: “Everything is worth what its purchaser will pay for it.” n This article contains material appearing in Mansfield Energy’s FUELSNews360°, Q4 2017
Dr. Nancy Yamaguchi
Prices weakened, and OPEC launched an oil price war. Many U.S. producers went out of business, but many remained and grew even stronger. As of the time of this writing, U.S. crude production has hit a new record of over 9.6 MMbpd.
Nancy is an author and petroleum industry expert specializing in the advanced analysis of energy markets. Dr. Yamaguchi is the Senior Markets Analyst for EPIC News+Data and the President of Trans-Energy Research Associates, where she focuses on a wide spectrum of fuel-related issues such as economics and the environment. She possesses a strong interest in global oil industry, including supply, demand and trading trends, as well as transport, refining, product blending, alternative and reformulated fuels, product quality and price behavior. Dr. Yamaguchi can be reached at NYamaguchi@Trans-Energy.com.
The removal of crude export restrictions unleashed exports. Although the accompanying figure shows exports averaging 960 kbpd during the first three quarters of 2017, the EIA’s weekly export data for the fourth quarter to date show that exports are now close to 1500 kbpd. The market has changed in so many ways, and it appears that the changes are irrevocable. Although WTI is most likely a more FMNMagazine
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by Keith Reid
Consumers Like the Idea of Alternative-Fuel Vehicles, but the Actual Purchase is Another Matter A
report by the Fuels Institute finds a strong disconnect between what potential car buyers say they will do and what they actually do when it comes to purchasing non-gasoline powered, alternative fuel vehicles. Consumers and Alternative Fuels 2017, the latest installment of the Fuels Institute’s annual measure of American consumers’ sentiment on vehicle purchases, finds that significantly more consumers said they were very likely or somewhat likely to purchase an alternative fuel vehicle than actually did purchase such a vehicle last year. The Fuels Institute, founded by NACS in 2013, is a nonprofit research-oriented think tank that evaluates market issues related to vehicles and the fuels that power them, incorporating the perspective of diverse stakeholders to develop and publish peer-reviewed, comprehensive, fact-based research projects. The Fuels Institute is a non-biased organization that does not advocate. For electric vehicles, the report found that factors influencing the gap between consumer interest and actual purchases included low gas prices, lack of battery charging infrastructure, range anxiety and battery replacement costs. Pending congressional legislation also could pose an additional challenge to the emerging electric vehicle market.
Key findings in the report: • When specifically asked if they would consider an all-electric vehicle for their next purchase, 51% percent of potential car buyers said they were very or somewhat likely to do so, up from 48% of respondents in a February 2016 Fuels Institute survey. Yet, electric vehicles represented only 0.45% of all light duty vehicles sold in 2016 (80,039 units). • While the Fuels Institute report indicates electric vehicles have a long way to go before capturing significant market share, increased consumer interest in electric vehicles, especially among consumers aged 18 – 34, could reflect a growing trend that spurs sales in coming years. Those aged 18 – 34 are significantly more interested in electric vehicles than older drivers. • The Fuels Institute report found a similarly strong disconnect between stated consumer interest in purchasing hybrid and diesel vehicles and actual sales of these vehicles. • Strong consumer interest in alternative fuel vehicles holds the promise of these vehicles capturing significant market share in the future. Factors, including government policies, will play a critical role in how quickly and whether the significant gap between stated consumer preference for alternative fuel vehicle and actual sales of these vehicles will narrow.
FUELS & SUPPLY
I think that as the battery costs continue to come down and by the end of the 2020s, automakers will make money on electric vehicles with consumers able to buy them at a competitive price, possibly without government support. Some of the performance concerns will also be lessened. That being said, if government support disappeared today, I don’t know how quickly we get to that breakeven point. Without those supports right now it might drive people out of business to where we don’t have the dramatic reduction in cost that we need for EVs to take off.
California has a zero-emission vehicle requirement, which is driving the majority of the electric vehicle sales. But economics are important. Think about this. Georgia eliminated an additional $5000 state-funded tax EV credit. Electric vehicle sales dropped 90% the next year.
Do you see continued federal support? The Trump administration so far has pulled some stuff back, but by and large it seems to be sticking fairly well in areas like the renewable fuel standard (RFS), etc., to the “all of the above” campaign statements.
FMN interviewed John Eichberger, executive director of the Fuels Institute, for his perspective on the findings.
FMN: How surprising is it that people tend to think
about change more than they actually follow through on those thoughts, especially if motivators for change decrease or if such change comes with added costs or disruptions?
I think with the tax bill, if the tax credit was not repealed this time, I don’t think it’s going to be repealed anytime soon. I haven’t read the bill yet so I don’t know how it’s extended or if there’s a sunset. [Editor: In the bill, the credits remain, but a phase-down does begin after a manufacturer sells over 200,000 units.] I don’t think any subsequent administration is likely to be interested in repealing it. Paul Ryan has said for years that he hates industrial tax policy like this. So, if they weren’t able to get it done this round, when are they going to have another shot at it?
Eichberger: If you take a survey we did earlier in the year and look at hybrids when gasoline was around $4 per gallon, the interest level on hybrids was around 82%. When gasoline was $2.25, the interest level dropped below 50%. You know it’s an economic decision and consumers are interested in alternatives when it makes economic sense. There’s a certain percentage out there that are altruistic— they want to be good for the environment or want to do that new thing or they’re tech-savvy or whatever—but when it comes down to it, the economics decide. The combination of energy costs and vehicle costs are powerful motivators.
You also have significant industries investing heavily in technology research. I think the future for the energy economy, whether it’s transportation or stationary, comes down to battery technology. If you want wind or solar, batteries have to take off. So maybe eliminating that tax credit would be viewed by some as being short-sighted from a more holistic perspective. The investment in research for electric vehicles is going to benefit stationary electricity storage as well. And all of that is incredibly important for long-term sustainability, not just from an environmental perspective, but from an economic perspective.
FMN: It’s interesting; there are a variety of electric
vehicle charging stations in retail and entertainment areas where I live in the Chicago area, and honestly, I’ve yet to see a single one being used. But you read about how it’s hard to find an unused one in areas like San Francisco.
Diesel has had a few stumbles on the consumer front recently, but what is happening with diesel today as an alternative fuel? It’s never really taken off as aggressively as some, myself included, would have liked.
Eichberger: Every market is going to be different and every experience is going to be different. California has a zero-emission vehicle requirement, which is driving the majority of the electric vehicle sales. But economics are important. Think about this. Georgia eliminated an additional $5000 state-funded tax EV credit. Electric vehicle sales dropped 90% the next year. My understanding is Congress has preserved its $7500 tax credit offset, which if I’m an electric vehicle manufacturer, I am celebrating big time. I think that would have been catastrophic—not for Tesla. For your Model S customer $7500—who cares? But your Model 3, your Nissan Leaf, your Chevy Volt—for those guys that $7500 is a deal breaker. The economics are critical.
It’s the customer. Your consumer base for diesel is small and our survey says there are more than 40% of consumers that would consider diesel fuel. But we also demonstrated that what they tell you they will do is not always what they will do. All that being said, what we’ve found is that the Volkswagen scandal has not dissuaded your diesel customer. After all of these things going on in the news making Europeans go nuts, American consumers still continue to say 40% to 45%—yeah, I would consider diesel fuel. They don’t actually buy it though, because the fuel is more expensive and the vehicle is more expensive and they don’t do the return on investment (ROI). Diesel has been 2.5% to 3.5% of the light-duty market consistently. And, our forecast with Navigant to 2025 does not indicate that the diesel light-duty market is going to get beyond 3%.
FMN: In previous discussion, you had mentioned that by about 2030, electric vehicles should become a much more viable solution in the marketplace than they are currently from both an economic and utility standpoint.
FUELS & SUPPLY
Consumers Like the Idea of Alternative-Fuel Vehicles Now we’re getting backlash overseas because they do have higher particulate matter emissions, which we can probably address. But all of these calls to ban them there—the same people spent the last 20 years incentivizing consumers to switch from gasoline to diesel by taxing gasoline and not taxing diesel fuel. Now it’s, “Stop! Stop!” These knee-jerk reactions don’t make sense. Let’s go ahead and take a look at the qualities, take a look at the engines and the emission profiles and see if there is something we can do to preserve the fuel and the vehicles because they are good vehicles.
FMN: How is electric doing in Europe? If you look at
the geography, you would think there would be a number of advantages for that technology.
Eichberger: We haven’t done an in-depth analysis. But
That 3%, however, is incredibly passionate. Look at Volkswagen. They pulled their entire auto group out of diesel. They had 80% – 85% of the market share of the car diesel fleet. Well, that was only 0.5% of the overall fleet. The other 2.5% are light trucks. So, you’ve got the Ram 1500 before it got pulled off the market by EPA—it’s back now— 30% of all units sold were diesel. You’ve got the Silverado and the Sierra, all available in diesel. You’ve got the Canyon and Colorado from GMC available in diesel. They both won Motor Trend Truck of the Year awards. I was at the DC Auto Show in January. GM is bringing the Chevy Cruze back. They’re introducing a new light-duty crossover utility vehicle (CUV) with diesel; Jaguar and Land Rover are bringing diesel in. You still have a committed diesel population, but it’s going to be niche.
Norway has a massive electric vehicle market, and my understanding is that they are starting to have some financial issues with that and they are reevaluating it. Europe’s going to be strong in electric cars and they are taking actions now. Announcements by France and Britain where they say we’re going to be “petro-free” by 2040 leave out references to hybrids. There are two explanations for that—either they don’t know that hybrids have internal combustion engines or they really don’t believe the market can be converted by 2040. Britain and France combined represent less than 5% of the global automobile market right now, but you have China with a 32% market share saying that as well. Britain and France will probably have five different governments between now and then, but China will not.
than ever on the forecourt.
China has a parochial interest in electric vehicles as they produce most of the batteries and they are the primary suppliers of the rare-earth elements that go into those batteries. At 32% global auto share—and you know India’s growth is going to be huge in the next 20 years—they have made similar statements. If I’m an automaker, I’m going to want to produce fewer models to satisfy global markets. So, does this force other countries that have not taken these positions to start absorbing EVs because they are the most financially reasonable model that the automakers are producing? There are a lot of moving parts out there.
Eichberger: Think about it, who is your diesel
FMN: To circle back to hybrids, is that pretty much strictly a
FMN: And yet I’m seeing more diesel customer at a convenience store? Folks like landscapers. The diesel is not where you make your money. They come in the morning and you make money on them buying all their food and drinks for the day. You can fit six people in a mega-cab and they’ll buy 100 gallons of diesel, and that’s nice. But they then buy $300 worth of food and drinks every day.
cost factor? We touched on that technology provides you, to some extent, the best of both worlds and solves a great many of the concerns a consumer would have with a plug-in-only electric vehicle. And yet, as soon as various supports dropped off, so did adoption.
FMN: I would imagine some of diesel’s resistance is
That is the problem. You think about these forecasts that EV is going to take over in 10 years. I believe they will take over, but it’s going to take a lot longer than 10 years. Let’s say the economics makes sense. There’s a consumer behavior issue. The electric vehicle requires a change in consumer behavior. It’s difficult to plan long trips where you have to identify charging points, and you have to plug-in every night— it’s just not as convenient as a gasoline engine.
that today’s consumers are unfamiliar with how far diesel technology has come over the years, and how close the experience is today to a gasoline engine.
They are no longer stinky, they are no longer noisy and the technology has made great strides. FMNMagazine
FUELS & SUPPLY A hybrid gives you some benefits of electrification without any consumer behavioral shift. Yet in 20 years hybrids have gained 2% to 3% of market share. How long will it take for all new behavioral paradigm with electric vehicles to gain 3% market share?
FMN: And at base levels,
market share and growth statistics are often not as useful when gauging total impact as they seem.
Consumers Like the Idea of Alternative-Fuel Vehicles
Don’t think about being a destination for recharging. Think about being an opportunity for customers to plug-in for five or 10 minutes the same way you would recharge your cell phone at an airport when you’re at 50% and you’re looking for an outlet.
: I like to remind people of rudimentary math fractions. However big the numerator is, you have to ask yourself, how big is the denominator? We have 242 million vehicles in the United States. So, the Navigant research we published in July represented a 26% annual increase in sales of electric vehicles through 2025. 26% combined annual growth rate is a tremendously high number. So, I ran the numbers out. What if we continue that 20% through 2035? Well, if you just run the numbers in a conventional fashion, EVs will have 32% market share of cars sold in 2035. We’ll be selling 5.5 million EVs that year. But they will represent just 8% of cars on the road and we will sell 10 to 11 million non- EVs and that’s with unbelievably aggressive growth rates.
FMN: What might be a strategy for a retailer
looking to serve electric vehicle customers today?
Eichberger: The estimation from companies that provide the
recharging. Think about being an opportunity for customers to plug-in for five or 10 minutes the same way you would recharge your cell phone at an airport when you’re at 50% and you’re looking for an outlet. They can pull into a convenience store and get a treat or a pack of cigarettes or a sandwich or something, while they put five minutes of charge in the battery. An extra 5% adds some peace of mind.
FMN: What about electric vehicles in
commercial markets? There seems to be a lot of activity in that sector.
If you’re a fleet operator, say you need to buy 20 cars this year and instead of driving 15,000 miles a year in that car you’re driving 120,000 miles. You start doing your economics of fuel and EVs might make a lot more sense because your ROI will be more immediately identifiable. The question we have not figured out yet is what is the adoption curve influence of the fleet adopting electric?
FMN: What is your main takeaway from the most recent research?
This study has educated a lot of our analysis, in terms that the consumer balance between economics and utility is so critical. In the absence of $4 gasoline, the only way these technologies really gain traction is through government action. Those policies can tilt the balance on how quickly the market turns. And, I really think over the next decade or two the yo-yo between economic reality and government programs is going to be very interesting to watch. n
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The Fuels Institute partnered with the National Association of Convenience Stores (NACS) on Consumers and Alternative Fuels 2017, which is based on a survey of 1,100 American adults. The full report is available at www.Fuelsinstitute.org.
charging infrastructure is that people are going to charge 80% of the time at home. That leaves 20% of the time on the road. People tend to drive 30 to 40 miles a day, on average, nationwide. They can plugin at home and it almost seems free because they only get that bill once a month, not every time they charge the car. They are also very rarely going to fully deplete the battery before they need a charge. So, a couple of strategies come to mind. Think about where your customer base is and your stores are located where people drive more than 50 miles. The electrical vehicle customer is going to constantly think about “where I can charge my car” at 50, 100 and 150 mile points. Put some chargers out there. Don’t think about being a destination for FMNMagazine
John Eichberger Executive Director,
RFS Point of Obligation Remains with the Refiners and Importers Shifting the Renewable Fuel Standard point of obligation has been under consideration at EPA for several years now. Currently the point of obligation rests with roughly 200 refiners and importers. Obligated parties have a Renewable Volume Obligation (RVO) based upon their production or importation volumes of conventional fuels. The process is driven by credits (Renewable Identification Numbers) generated when biofuel is produced and separated from the physical biofuel when it is blended with conventional fuel. RINs can then be used to establish RVO compliance or sold to companies that cannot otherwise meet RVO compliance. Ultimately, the final customer ends up paying most of the costs. A move largely driven by pure-play independent refiners (not owning terminals or marketing/retail) worked to push the point of obligation downstream to terminal operators and retailers. They note that they have to buy RINs without the advantage of being able to blend the fuel. They claim with some justification this is unfair to them and to smaller marketers and retailers. They also claimed that shifting the point of obligation would advance renewable fuels with little market impact.
Fortunately, in November 2017 EPA decided not to shift the point of obligation. Any sweeping government-mandated program is almost certainly going to have some parties that benefit more than others. Shifting the point of obligation from 200 refiners and importers to 1300 terminals would be massively disruptive and would require roughly the same administrative requirements for establishing RVOs and tracking compliance as it does today. It would also negatively impact refiners and larger marketers that, for the past decade, have committed to meet the blending requirements. That is why it was opposed by virtually all of the downstream (marketing and retail) associations, comparable commercial fueling entities and even the American Petroleum Institute.
Moving the Industry Forward by Mark Murrell
The annual Best Fleets to Drive For program (www.BestFleetsToDriveFor.com), is dedicated to uncovering the best workplaces and best practices in the North American trucking industry. Produced by our company, CarriersEdge, in partnership with the Truckload Carriers Association, the program evaluates more than 100 nominated fleets and collects thousands of driver surveys each year. The resulting data provides a clear picture of whatâ€™s working at fleets of all sizes.
COMMERCIAL FUELS The nomination and evaluation process is rigorous. Nominated fleets must gather many driver surveys and data from all departments and are evaluated across a range of performance criteria. The evaluation identifies those companies most successful in creating a work environment in which drivers feel valued. More than half don’t make it to the final round. Those that do demonstrate that they have strong management and employee teams with the ability to communicate and collaborate effectively. Finalists that earn the coveted Best Fleets to Drive For honor show mastery in developing recipes for success. Last year, the Top 20 Best Fleets featured several bulk transport and tank carriers.
or by calling in through a conference line when they don’t have access to the internet. Drivers can also view a full recording of the meeting if they can’t attend during the live session. The carriers find that by using web conferencing, drivers can participate in more collaborative and interactive discussions. And since drivers can view the meetings later, they can stay in the loop and still meet their schedules.
Committees: Some tank carriers treat their driver committees like town councils. The driver council for Bay & Bay Transportation, which operates a full-service dry tank non-food grade transportation division (www.BayAndBay.com/dry_tank.php), is made up of six drivers who represent different segments of the company. The company ensures all constituencies are represented while also maintaining continuity by keeping a third of the drivers on the council and replacing two-thirds with new drivers annually. To offer greater transparency, discussions from the council’s quarterly meetings are reported in a newsletter distributed companywide.
Each year, we update the corporate questionnaire and driver survey to reflect new ideas and trends discovered in the previous year. This process captures best practices as they’re emerging, ensuring winners always reflect the latest innovations. As we’ve been examining nominations for the 2018 honors, we’re seeing innovations break down nicely into two main themes: expanding communication and demonstrating respect for drivers.
Expanding Communication Gone are the days when an open-door policy and suggestion box represented the foundations for communication with drivers. Over the past few years, the transportation industry’s Best Fleets have continually been working on new ways to keep drivers in the loop and engaged. This year, fleets continue those efforts with:
Town Halls: Moving away from the traditional weekly meetings, the most innovative fleets deliver documents and policy updates through interactive town halls over the web or by satellite. For example, some fleets hold monthly meetings with drivers through a web conferencing tool. Drivers participate by using a laptop, PC or mobile device FMNMagazine
Moving the Industry Forward
Coaching: Over the past four years, driver coaching has changed. Previously, fleets provided coaching and mentoring programs for new hires or drivers in finishing programs, but only for a short time. Now, coaching continues for a year or more, and in some cases, it never completely stops. Also, with a greater prevalence of dashcams, coaches have access to more data, improving their overall effectiveness.
Everyone says they respect their drivers. But since actions speak louder than words, Best Fleets pursue new ways to demonstrate respect regularly.
Vehicle Spec’ing: Bulk and tank fleets involved in the Best Fleets program uniformly provide newer, higher-end equipment to drivers, with the average age of their fleets rarely exceeding two years. With much equipment spec’ing to be done, more and more fleets involve drivers through driver committees or by collecting their feedback.
Equipment Management: Regular maintenance beyond the routine oil changes and inspections is just as important as acquiring new gear. That’s why participating fleets have been developing increasingly more elaborate communication processes between drivers and shops to gain optimum efficiency. For example, fleets gain increased automation in their maintenance shops by connecting their trucks’ electronic control modules (ECMs) to their shop maintenance management systems.
Demonstrating Respect Everyone says they respect their drivers. But since actions speak louder than words, Best Fleets pursue new ways to demonstrate respect regularly. Some of the less obvious examples include:
Home Time: Best Fleets know drivers covet home time, particularly during those mustattend events such as weddings, anniversary celebrations, graduations and birthdays, including quinceañeras. With their drivers on the road so much, Best Fleets are implementing new policies to focus on their accuracy in getting drivers home on time and then measuring their success.
Best Fleets recognize how locking drivers out of the building and making them use a driver window to speak to coworkers can easily undermine great driver programs. One industry leading bulk carrier not only provides drivers direct access to coworkers at its terminals, but also goes beyond equality by offering drivers amenities at their terminals. The company’s head office is a self-contained small town offering a doctor’s office, hair salon, movie theatre and restaurant. Drivers and management can often be seen working out together in the gym, and the owner regularly plays basketball with drivers. Just looking at the eight areas above, it’s easy to see how much and how quickly the industry is changing. While these activities barely registered in the survey results we saw five years ago, they’re becoming more commonplace now. As always, it will be fascinating to see what this year’s crop of Best Fleets are doing for their drivers, and how those chosen for the 2018 Best Fleets to Drive For honor raise the bar for innovation. n
Recognition: Moving beyond the traditional annual recognition banquets, some carriers hold events more frequently throughout the year. Plus, they recognize drivers not only for the safety milestones and driver-of-the-month honors, but also for various anniversaries, positive customer feedback and other accomplishments such as high fuel efficiency milestones through a ceremony at the company’s headquarters or through social media. FMNMagazine
Mark Murrell Mark is co-founder of CarriersEdge, a leading provider of online driver training for the trucking industry and co-creator of Best Fleets to Drive For, an annual evaluation of the best workplaces in the North American trucking industry produced in partnership with Truckload Carriers Association. He can be reached at www.CarriersEdge.com.
WEX Shares Disaster Preparedness Advice by Keith Reid
ropical Storm Harvey and Hurricane Irma showed not only how dangerous but how disruptive Mother Nature can be with natural disasters. Harvey caused at least 90 confirmed deaths and up to $200 billion in damage. Irma resulted in at least 134 deaths and a minimum of $50 billion in damage as it swept through Florida and other states in the Southeast.
“The lesson learned from these disasters is that you need to be able to procure product. That sounds simple, but when disaster hits, all bets are off. Nobody’s calmly sitting at their desk on their computer deciding to change the limits that they might have on their fuel program. You need to be able to make a decision really quickly—push one button and you’re done.”
A variety of players throughout the industry were impacted. Retailers saw significant damage at their sites and loss of business. Marketers faced widespread disruptions. Yet, the industry pushed through and served their customers to the best of their abilities. One player contacted Fuels Market News with a story of how it helped facilitate municipal first responders and fleets during and after the hurricanes, and some disaster preparedness advice for commercial fleets. WEX, as a fleet card provider, was positioned to act as a coordinator between its marketer and retailer partners and fleet operators. We interviewed Bernie Kavanagh, WEX’s SVP and general manager of North America large fleet and strategic relationships, to get some insight into the challenges faced and lessons learned.
Bernie Kavanagh, WEX
WEX Shares Disaster Preparedness Advice
“What typically happens in impacted areas is that you have emergency fueling programs and you’re relying on folks that do bulk fueling or wet hosing/mobile fueling—and that has to be put in place well in advance. You’re not going to end up the day before Irma hits and say, “Can I get a delivery of 8,000 gallons?” That’s not going to happen.”
Bernie Kavanagh, WEX
These hurricanes have been the big news, but they are hardly unique where disaster is concerned.
Kavanagh: Obviously this time of year we’re talking a lot about hurricanes. You have fires that are happening on the West Coast. In a couple of months, we’re going to start talking about ice storms. The Midwest is home to tornadoes that take out areas. So, really there aren’t a lot of areas that couldn’t potentially be impacted by some sort of a natural disaster. It just becomes a matter of timing.
FMN: What is the most important factor going into one of these natural disasters?
Kavanagh: The lesson learned from these disasters is that you need to be able to procure product. That sounds simple, but when disaster hits, all bets are off. Nobody’s calmly sitting at their desk on their computer deciding to change the limits that they might have on their fuel program. You need to be able to make a decision really quickly—push one button and you’re done. We work with all of our customers to create emergency fueling profiles. So, looking down the Florida area three or four days in advance with a potential hit, you push one button and profiles are moved over. Now they have whatever they need, whether it’s unlimited access or anything like that. So, they’re prepared for what could potentially hit.
How do you make sure those fleets get their emergency profiles fulfilled at the supply side?
Kavanagh: There are a couple of different ways to handle the supply piece. We have customers who are in the government space—federal agencies and states that use our program—and we have local municipalities with fire and police. We have ambulance operators. We’ve got tree trimming companies who have to get in and clear the brush. All of those people fall into a first responder bucket. You would like to think that there is a priority given at a retail fueling location, but that’s really hard to manage. It’s hard to have a consumer who might be trying to get the family out of harm’s way yield to a police vehicle. It is a difficult situation to balance. FMNMagazine
What typically happens in impacted areas is that you have emergency fueling programs and you’re relying on folks that do bulk fueling or wet hosing/mobile fueling—and that has to be put in place well in advance. You’re not going to end up the day before Irma hits and say, “Can I get a delivery of 8,000 gallons?” That’s not going to happen. So, you work with them well in advance.
FMN: How deep does the pre-disaster planning go? Kavanagh: There are lots of test runs. We’ll deploy mobile fueling trucks to certain locations just to see how quickly they can get there with new product and how quickly they can leave. How much product are they going to need? How are we moving product around? We move product with the help of our partners between customers. In Houston, we were working with one of our ambulance companies and it got to a point where they felt as though their work was done. They communicated back to us to say, “OK, you can release this truck now—we’re good.” And then we contacted the truck and rerouted it to the next company.
FMN: What technologies do you use to bring customers and suppliers together?
Kavanagh: We rely on data sources like mobile apps and social media and things of that sort. On the retail side we’ve got an app, WEX Connect, which normally helps people find the best price. Nobody’s really concerned with the price of gas in a natural disaster—they want to know who has fuel. But, with the app, I know the station on the corner of 5th and Main just had a transaction one minute ago, so I know they’ve got product. I know they have power. I’m going to go there to get some fuel. Another big part in this is trying to find out where the vehicles are, and not just fuel delivery trucks, but also tracking where the customers are. You may have received a
WEX Shares Disaster Preparedness Advice We’ve worked with all of our mobile fuelers to make sure that they still capture the same level of data that you would at a normal retail location. The mobile fueling trucks are fitted with card readers or they have iPads and they’ve got card readers attached where they can still scan a fuel card and capture all the right level of data. That way we can still administer all of the billing and reporting to the appropriate folks while still allowing them to get the fuel that they need.
“Everybody is working together to solve this problem. But then, after the fact, how do you know who got fuel and how much came out of the state of Florida tank? That becomes an issue that nobody thinks about in the middle of a hurricane.”
FMN: So far, we’ve focused on the first responder types.
I would imagine your regular fleet customers were riding out the storm, but then after the fact, I’m sure they wanted to get back to normal operations. What challenges do they face?
Bernie Kavanagh, WEX
call in the morning that said they’ve set up a tent city in the parking lot of a mall and this is where we want our fuel delivered. Well, since the morning there might have been a change caused by a storm surge. Now, all of a sudden, that parking lot is under water. Maybe they couldn’t communicate that, and we didn’t know they’d moved. We can use telematics to figure out where those vehicles are—32 vehicles parked in a different parking lot. That’s where they moved. We can send the fuel truck over to them. So, I’m using that telematics data to be able to deploy the fuel resources to the right location.
FMN: Hindsight is always 20/20. I would imagine that as
good of an idea as it is to set up a disaster policy beforehand, getting customers to commit the time and effort can be a challenge.
Kavanagh: Natural disasters are going to happen. It’s a when, not an if. If you can put those controls in place and if you can secure a mobile fueling agreement or at least have the partner that has those connections, then it’s time well spent. When that time comes, you’ve got something in place that didn’t cost anything. You’re not on the outside looking in, scrambling to find somebody who can get some fuel, or somebody who can answer a phone, or trying to figure out how you can set a limit on your card or raise a credit limit or do something that you hadn’t really even thought through. Our teams are again starting to have conversations with our community as a reminder of the things that we’ve just learned and the things that need to be put in place.
You talked about using the app to identify who still has fuel and that touches on the retail impact of these events. A lot of these retailers are victims alongside their customers, with their canopies down and their forecourts under water.
Kavanagh: Yes, you’re right. We try to help our retail partners. We don’t own gas stations, we don’t control fuel pricing and we don’t control supply—that kind of stuff. There have been instances where you’ve got a site where the forecourt is under water and the water’s receded. So, now they’re open again but maybe their point of sale (POS) devices are down and they want to start to accept transactions because they want to sell product. We’ve set up authorizations via phone—a work-around while somebody is in one of those situations so that we can get them back up and running as soon as possible.
FMN: What’s your main takeaway from supporting such disaster relief efforts?
FMN: This appears to be a highly flexible response.
Kavanagh: Everybody bands together. What I really find interesting is when customers help customers, and it’s an honor helping bring people together. n
How do you keep financial track of the fuel?
Kavanagh: The state of Florida is a customer of ours. They have a site that has fuel and they can use that. But, they need Florida Power and Light to get in there and help them. So, they may allow the Florida Power and Light vehicle to fuel from their tank which makes all the sense in the world. Everybody is working together to solve this problem. But then, after the fact, how do you know who got fuel and how much came out of the state of Florida tank? That becomes an issue that nobody thinks about in the middle of a hurricane.
Kavanagh: After the fact, you’re going to have some customers that might need to double or triple their routes or their volume of business because they’re part of a cleanup effort. There are things that we learn every day that you just don’t think about, like a uniform delivery company. People need to go do their jobs and maybe their facility just got flooded out and they don’t even have uniforms. So, a uniform company gets busy. You likely never would have made that connection until you see it happening.
Bernie Kavanagh WEX SVP and General Manager, North America Large Fleet and Strategic Relationships
Cold Flow Diesel Fuel Packages: Protecting Equipment When Temperatures Drop Choosing the appropriate cold flow additive is critical to ensuring that your diesel fuel will operate in cold weather climates—regardless of the source of fuel. Using a properly formulated cold flow diesel additive package formulated for light, middle or heavy fuel with/without biodiesel could be the difference in your equipment operating in cold climate conditions. Diesel fuel is a complex mixture of small to large hydrocarbon molecules. These molecules can be straight chain, cyclic, aromatic or paraffin wax molecules of complex structures. At above-freezing temperatures, the diesel fuel is homogeneous and works effectively in all regions. As temperatures begin to plunge, the paraffin wax in the diesel fuel begins to separate, leading to cloudy diesel fuel (cloud point) and the first signs of the fuel gelling. As more wax settles out, larger crystals begin to form that will inevitably lead to filter plugging. If enough filter plugging occurs, the engine will starve—leading to shut down. The only way to keep diesel fuel flowing in cold weather (aside from mixing it with #1 diesel or kerosene—and the penalties in horsepower and fuel economy that come with it) is to add a cold flow improver or CFI. CFIs keep the wax crystals from sticking together, so they stay small in size and shape, allowing them to pass through fuel filters. The components used harmlessly burn with the rest of the fuel. A good CFI will give you an extra 10 – 20 degrees of safety net, so your equipment starts more easily and stays running in cold weather. With cold flow additive packages, you can reduce or eliminate the need for blending with costly #1 diesel or kerosene. MCC’s CFI additive packages
getting cold, typically at least 10 degrees (or more) above the cloud point of the fuel being treated. These early treatments prevent problems from happening, but they will not reverse the process once the fuel is gelled. If gelling occurs additional measures will need to be taken to get the wax crystals back into solution.
With CFI give you the ability to achieve the best performance by lowering the Cold Filter Plugging Point (CFPP), improving Pour Point and improving fuel handling. Other additives in our premium cold flow improver packages minimize the effects of water contamination and inhibit ice crystal formation with icing inhibitor and dispersant additives, resulting in less engine and fuel system maintenance and down time. It’s important that diesel fuel be treated prior to cold weather and the fuel FMNMagazine
At MCC, we offer cold flow packages that have been optimized to meet your varying needs. Our packages include additives to help with wax modification in light, medium and heavy wax content diesel fuels; some packages contain Wax Anti-Settling Additives (WASA), as well as icing inhibitors to help with diesel fuels that may have ingressed water and prevent icing in the fuel, fuel lines and filters. Contact us today to find out more about our cold flow and other additive solutions to keep your equipment up and running. n
Dr. Bernard C. Roell, Jr. Dr. Roell is the Technical Director at MidContinental Chemical Company, Inc. (MCC) and has over 20 years of extensive experience in the specialty chemical industry. Dr. Roell can be reached at bernardr@MCChemical.com. MCC manufactures and distributes petroleum additives that enhance the performance of fuels and lubricating oils in vehicles, equipment and machinery. MCC provides comprehensive additive solutions to provide customers with performance advantages from the most advanced additive technology available today.
by Maura Keller
TO LEASE OR BUY YOUR TRUCKS
“We see that most of our customers understand our value proposition when it comes to maintenance, so most of our leases include all maintenance, including tires and brakes. And our customers know that up-time is a critical success factor in their business, so most customers do include substitute vehicles in their lease so that they can keep running their fleet without disruption.”
John Barlow, Ryder
The decision to buy or lease truck equipment
can be difficult. It requires careful consideration of the many factors involved as well as finding key specialists who can provide advisory services to complete the deal. Of course, purchasing or leasing new equipment can impact the efficiency and structure of an entire organization. The term “leasing” has been around for decades. As traditionally defined, leasing is an agreement similar to renting. Whether you choose a 36- or 72-month lease, each month you are paying the trucking company for the right to use the equipment, with an option to buy once your lease is up. For some fleet owners and operators, while leasing looks like a great deal because of a low or no down payments and lower monthly payments, if you choose to buy your own trucks when your lease is up, you may end up paying more for the trucks than if you had originally purchased. That said, many businesses and professionals choose to lease their fleet vehicles because they plan to upgrade their vehicles every two to four years and don’t want the maintenance expenses that are often associated with older vehicles. According to John Barlow, vice president of global products at Ryder, because each business is unique and their needs vary dramatically, Ryder tries to tailor each lease agreement to the customers’ specific needs, so there isn’t really a “standard” lease per se.
To Lease or Buy Your Trucks
“With that said, we see most lease terms range between three to seven years,” Barlow says. “We see that most of our customers understand our value proposition when it comes to maintenance, so most of our leases include all maintenance, including tires and brakes. And our customers know that up-time is a critical success factor in their business, so most customers do include substitute vehicles in their lease so that they can keep running their fleet without disruption.”
“You choose the lease with the maintenance level and delivery method you prefer. You choose the type of truck you want. And you choose from many financing options. The only commitments you make in this lease are the ones you want—the ones you choose— because they are right for your business.”
In May 2016 Ryder launched a new portfolio of leasing options for commercial operations to provide unique, individualized options that work for each company.
PACCAR Leasing (PacLease) also provides fullservice lease, rental and contract maintenance programs, combined with premium quality custom-built Kenworth and Peterbilt trucks. PacLease has independent and company owned full-service leasing locations throughout North America through a network of over 500 locations.
“We’re constantly listening to the marketplace and offering customers more ways to do business with Ryder on their terms,” Barlow says. “Our fleet management products and services help address some of the barriers that in the past have prevented private fleets from outsourcing their transportation functions. The main difference between the leasing products comes down to the level of maintenance the customer receives, which is included in the price.” The leasing options Ryder offers include: • Ryder ChoiceLease Full Service: The Company’s traditional full-service lease with all maintenance included, even items such as tires and brakes for the duration of the lease. • Ryder ChoiceLease Preventive: Allows customers to enjoy the financial benefits of a Ryder lease with preventive maintenance on new and used vehicles, enabling them to choose how and where to handle their other repairs or maintenance outside of preventive checks. • Ryder ChoiceLease On-Demand: Provides customers with the financial benefits of leasing, combined with access to Ryder’s national maintenance network on a pay-as-you-go basis. The offering is available on new and used trailers, as well as used power equipment. As Barlow explains, with each option, the customer can work with Ryder to determine the term, financing arrangements and service delivery method. “This is a first in the transportation industry. You decide the terms,” Barlow says. FMNMagazine
“Our customized transportation solutions include programs such as PacTrainer, an online suite of compliance courses to improve operator driving performance; PacTrac, vehicle fleet telematics to improve productivity; PacTax, fuel tax filing and reporting; PacFuel, nationwide fuel discounts; and PacToll, road toll management and invoice consolidation,” says Mike Willey, PacLease director of sales. Willey is seeing that the average length of a full-service lease contract is about 60 to 72 months. “The standard full-service lease contract includes full financing with no up-front costs, legalization such as fuel tax reporting, permitting and licensing along with a full maintenance wrap that includes substitute vehicles,” Willey says.
To Lease or Buy Your Trucks
“The customer doesn’t need to source equipment, hire administrative staff to manage the vehicles or worry about servicing or maintaining the vehicles. A full-service lease provides substitute vehicles when trucks are inoperable, thus ensuring that the customer maximizes uptime, which allows them to deliver their products.”
Mike Willey, PacLease
Advantages and Drawbacks
The advantages and disadvantages to leasing versus having an in-house fleet operation are as varied as the companies themselves.
“Full-service leasing is typically ideal for private fleets that are not ‘for hire’—although there are several large ‘for hire’ fleets that use full-service leasing,” Willey says. “Companies that can’t or don’t have a desire to run their own shop or build a transportation department are ideal candidates for full-service leasing.”
A full-service lease contract typically covers the truck from cradle to grave. The provider is responsible for all maintenance-related items throughout the entire term, thus relieving the customer of any maintenance-related expenses outside of vehicle damage. From a cost perspective, a full-service leasing provider can typically maintain the vehicles cheaper than a private fleet. And the amount of investment in technology and infrastructure the providers have in place allows them to operate with scale, giving them purchasing power and capabilities that most stand-alone companies don’t have with their in-house maintenance operations. These cost savings are passed to the customer, making the full-service lease contract advantageous for the customer.
Using full-service lease and rentals also can strategically help address capacity (both up and down), new business awards and other business challenges including driver retention, new product trials, acquisitions, residual risk, etc. Based on the business, certain aspects of the full-service lease product mix will be more appealing. “If you are a for-hire carrier, rental units may be a way to help cover for equipment shortages and surge capacity,” Willey says. “If you’re a private fleet who generates revenues from things other than per mile charges such as a bulk hauler, manufacturing support, etc., a full-service lease can help lower the cost of ownership and compliance by leaving the fleet management to a leasing provider who can bring you the benefits of scale by being part of a larger local fleet.”
According to Willey, the advantages to full-service leasing versus buying are two-fold. The first advantage being that a full-service lease agreement allows PacLease’s customers to focus on their core business, which is most often not transportation. “The customer doesn’t need to source equipment, hire administrative staff to manage the vehicles or worry about servicing or maintaining the vehicles,” Willey says. A full-service lease provides substitute vehicles when trucks are inoperable, thus ensuring that the customer maximizes uptime, which allows them to deliver their products.
So, for whom are full-service lease options not appropriate? Companies with extremely large fleets who rely on the trucks to generate revenue typically invest a lot of money to maintain their vehicles. In this case, the trucks are their core business. These companies typically have sophisticated in-house maintenance operations and employ experienced transportation professionals to run their business.
The second advantage is the customer doesn’t have any up-front costs associated with a full-service lease, allowing them to invest in other aspects of their business. FMNMagazine
A Growing Trend COMMERCIAL FUELS
To Lease or Buy Your Trucks
Barlow also is seeing trends strengthening with regard to leasing fleet vehicles, which has led to an uptick in outsourcing. Some of the most important trends fueling this are the rising costs of equipment and the increasing complexity of technology. As Barlow explains, the benefits of a Ryder’s maintenance solution deliver advantages to fleets such as minimizing fleet downtime, maintaining consistent levels of maintenance and repair, reporting and control with predictable monthly expenses, and automated billing. What’s more, shortages of technicians and training resources for advancing technologies also make outsourcing an attractive option. “Additionally, cost pressures and ever-changing, stringent regulations are making it all the more challenging for businesses to focus on their core competencies,” Barlow says. When leasing with a third-party provider like Ryder, the customer has access to a network of maintenance facilities, which guarantees consistency as well as gives the customer peace of mind that their vehicles will be covered no matter where in the country they are traveling. “Ryder’s facilities offer a variety of benefits including maintenance, fueling and washing,” Barlow says. “Customers benefit from competitive labor rates when they enter into one of our lease agreements. The more maintenance they commit to, the better those rates are on labor and parts. As Ryder maintains the vehicle, we are also able to keep detailed records and handle the laborious administrative tasks of compliance through back-end systems and resources. Compliance regulations are only growing more and more complex, making it that much more difficult for fleet operators to manage on their own. At Ryder, we relieve the customer of that responsibility and help them to improve their Compliance, Safety, Accountability (CSA) scores.”
“Customers benefit from competitive labor rates when they enter into one of our lease agreements. The more maintenance they commit to, the better those rates are on labor and parts. As Ryder maintains the vehicle, we are also able to keep detailed records and handle the laborious administrative tasks of compliance through back-end systems and resources.”
John Barlow, Ryder
To Lease or Buy Your Trucks
As referenced earlier, no two businesses or the unique needs for their commercial vehicles are the same. Each situation is different and needs to be analyzed as such. Ryder uses the company’s proprietary total cost of ownership (TCO) model to help walk customers through what makes sense for them. A variety of factors come into play including purchase price, the application the vehicle will be used for, the asset management strategy of the organization, the running cost of the vehicle(s) and much more.
Also, many companies simply do not want to commit for too long to a maintenance vendor. This is why Ryder launched its portfolio of flexible lease and maintenance options— ChoiceLease and SelectCare. “Because we heard the market, we responded with a portfolio of products that can be tailored and are not a one size fits all model,” Barlow says. When it comes to evaluating whether to lease or buy trucks, Walden often sees companies make the mistake of doing whatever they did before without considering all the options available to them.
From a cost perspective, is it typically more expensive to have inhouse maintenance operations versus going through the leasing company? “We do find in almost all of our TCO analyses and case studies that it is more expensive for a company to have their own inhouse maintenance operation versus utilizing Ryder,” Barlow says. Here’s why:
“It is easy to say, ‘we own our trucks,’ but when we dig deeper, we oftentimes find out that the monthly expenses are significantly higher than if they were to lease their equipment,” Walden says. “With the cost of compliance ever increasing and the complexity of today’s technology having such an impact on the transportation sector, full-service leasing offers many benefits that customers may not be aware of.”
Let’s says a company believes they can conduct the maintenance operation better and cheaper. Ryder has over 5,900 technicians who receive some of the best training in the industry. “In addition, our technicians have one of the highest tenures in the industry and are constantly up to date on the latest technologies,” Barlow says. “With access to over 230,000 vehicles in our fleet, we have become experts second to none in the maintenance of commercial vehicles. In most cases we can save a company anywhere from 15 to 25 percent on their cost structure when it comes to leasing and maintaining their vehicles.”
Spending time with a lease professional to discuss the needs, options available, total cost of ownership and best fit for the organization can help avoid this mistake. n
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ELD implementation Starts The phase in period of the Electronic Logging Devices rule began in December 2017. Full compliance is required by December 2019. With ELD, drivers are required to replace their paper logs with electronic logs linked to GPS data with the goal being better tracking of compliance with hours of service regulations designed to improve public safety by reducing over-tired drivers. This requirement has seen broad support among the largest motor carriers with support dropping off down to the independent trucker level. Concerns officially center on government intrusion/privacy, cost and learning new systems. The unofficial concerns center on a lack of “flexibility” currently possible with paper logs, as nothing has changed with the actual hours of service (HOS) regulatory requirements.
One can be sympathetic to independent truckers and smaller carriers faced with cheap freight rates and disruptions at the customer’s loading dock that can kill a day’s productivity and profit. Many truck drivers who fudge logs would say they know their mental and physical state, are responsible individuals and contend that a small amount of flexibility solves numerous problems without endangering other motorists. However, there are those who are not responsible and significantly abuse the system. Perhaps ELD will force a new look at HOS and general industry standards to get regulatory requirements that better work for all without the second set of log books.
WHOLESALE & FLEET OPERATIONS
by Doug Mihal and Shalee Stockstill
No supplier wants to deny a customer when they arrive to get product. If a
customer sees that there is allocation remaining in the supplier’s allocation viewer, they assume the terminal has what they need. Unsurprisingly, product outages occur at the rack today. What is surprising is the fact that manual methods and assumptions remain common practice for monitoring and communicating supply availability to customers. Have your customers ever dispatched trucks to your rack, just to find out product wasn’t available?
Improve Communication for Supply Availability When facing changes in product availability, your lifting solution should help communicate the situation in near realtime with internal stakeholders and external customers. Today’s innovative lifting technology can empower suppliers to track, communicate and allocate more quickly and eﬀectively than ever before
Product interruptions and inconsistencies happen. To make matters more difficult, demand forecasting and inventory reports are not always as accurate, nor as timely, as you’d like them to be. Your customers may pull more product than you anticipated, you may not keep enough safety stock on hand or you may face a dreaded pipeline disruption. When these interruptions take place, suppliers are often stuck between a rock and hard place, reacting to frustrated customer inquiries via phone or email—rarely an efficient process. So, how can suppliers improve their customer service for successful product lifting? It’s a matter of improving communication around supply availability.
Are you getting the most out of your lifting solution? When facing changes in product availability, your lifting solution should help communicate the situation in near real-time with internal stakeholders and external customers. Today’s innovative lifting technology can empower suppliers to track, communicate and allocate more quickly and effectively than ever before. The real-time data of today’s industry-leading lifting solutions can help to better anticipate product demand and manage inventory. This improved data visibility also positions suppliers to better prioritize retail, committed supply contracts and key customers.
WHOLESALE & FLEET OPERATIONS
Improve Communication for Supply Availability Keeping customers happy is of paramount importance. One easy way to do so is by updating them on product availability to help them avoid sending trucks when product is out. Communicating supply externally is an invaluable strategy that benefits those on both sides of the rack transaction.
By maximizing your lifting control solution, you can also ensure everyone gets a share of the product during periods of tight supply. With enhanced tracking capabilities, suppliers are empowered to allocate a certain percentage of product to all customers and communicate the alternative product availability accordingly. And communication shouldn’t stop at customers, it must be a focus internally as well.
As stated previously, demand forecasts and supply do not always go as planned. To handle these inevitable swings in inventory as seamlessly as possible, suppliers can manage expectations for better efficiency and customer satisfaction. Targeted external communication also helps to immediately inform customers when they need to switch terminals to avoid getting turned down for product, saving them time, money and frustration. By maximizing your lifting control solution, you can also ensure everyone gets a share of the product during periods of tight supply. With enhanced tracking capabilities, suppliers are empowered to allocate a certain percentage of product to all customers and communicate the alternative product availability accordingly. And, communication shouldn’t stop with customers, it must be a focus internally as well.
The beneﬁts of real-time communication
Internal communications are just as critical as external messaging if there’s an issue with supply availability, especially within larger organizations. By communicating supply availability internally, you can increase employee morale and efficiency by addressing potential issues swiftly, giving them confidence in the preparedness and flexibility of their organization. It can also improve the accuracy of scorecard
Clear, real-time communication about product shortages or outages makes a huge impact on the efficiency of your customers’ operations—not to mention your own. Utilizing an advanced lifting control solution for supply availability, you can respond faster to changing conditions at a specific terminal and notify your customers about them with just a few keystrokes.
WHOLESALE & FLEET OPERATIONS
Improve Communication for Supply Availability When customers can view the product availability, not just their allocation status, they can better manage dispatching decisions and make proactive arrangements to get the product they need.
Price is not the only thing that customers must consider anymore when choosing which suppliers to do business. Suppliers that lack the technology to provide proactive communication – through multiple channels – to their customers can no longer keep up with the industry leaders.
reporting to improve tracking of internal task execution and monitor any issues that arise, and make it easier to establish and access a repository of historical events. Furthermore, internal transparency of product availability helps those throughout the organization prepare for supply events. For one, it can improve future forecasting and understanding of when inventory should be held for improved planning and peace of mind. Internal communications can also proactively alert sales people to outages before they learn about it from a customer—a situation that can damage customer relationships when it appears that the organization’s left hand doesn’t know what the right hand is doing. Overall, sharing supply availability both externally and internally helps strengthen customer relationships and retain tighter control over your product. External and internal supply allocation communication can benefit customers as well as your organization in a variety of ways, but what sets an advanced control lifting solution apart from the pack?
What does eﬀective communication look like?
When supply availability changes unexpectedly, your lifting solution should be able to provide a more reactionary communication channel to customers: email or text alerts. Alerts that notify your customer of changes in supply that will directly impact them, whether they are at their desk or on the move, help to keep everyone informed about a supply event. Alerts not only warn customers of unexpected supply changes, they can also notify customers when normal business can resume – keeping everyone on the same page when it comes to lifting. Whether through an allocation visibility application or supply alerts and notifications, an advanced lifting control solution gives suppliers the ability to better communicate product availability with their customers.
Give customers the supply insight they need Of course, suppliers are already aware of their supply availability. What sets the best suppliers apart from the rest is the ability to communicate allocations and supply availability efficiently to customers. Whether it is through an allocation viewer or alerts and notifications, multi-channel communication about supply availability strengthens customer relationships, tightens your control over product and allows for better decision making for both you and your customers. In today’s competitive market, it’s critical that suppliers better manage availability and give customers the supply insight they need with an advanced lifting control solution. n
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Price is not the only thing that customers must consider anymore when choosing which suppliers to do business with. Suppliers that lack the technology to provide proactive communication—through multiple channels—to their customers can no longer keep up with the industry leaders. The technology that provides the most value to the customer and the supplier using it is an advanced lifting control solution that can quickly and efficiently communicate supply availability and outages that impact customers in a variety of ways. So, what are the different channels for effective customer communication around supply availability?
Doug Mihal Doug holds the post of National Sales Director – DTN Supplier Solutions, working closely with his customers to provide both software and hosted solutions to solve their growing challenges.
A supplier’s allocation viewer is the first communication channel in the equation for improved supply visibility. When making buying decisions, customers can utilize supply notices via the supplier’s allocation viewer to avoid being turned down at the rack. Time is money, and when it comes to supply information it’s important to have an up-to-the-minute view of allocations. FMNMagazine
Shalee joined DTN 14 years ago as a Director of DTN Supplier Solutions, where she works one-on-one with her clients to ensure their downstream needs are being met.
Record Oil and Gas In its January 2018 Short-Term Energy Outlook (STEO), EIA forecasts that total fossil fuels production in the United States will average almost 73 quadrillion British thermal units (Btu) in 2018, the highest level of production on record. EIA expects total fossil fuel production to then set another record in 2019, with production forecast to rise to 75 quadrillion Btu. Record production levels are largely attributable to increased production of natural gas and crude oil enabled by the use of hydraulic fracturing techniques in tight rock formations. EIA expects increases in natural gas production to be the leading contributor to overall fossil fuels production growth in 2018 and increases in crude oil production growth to the be the leading contributor in 2019. “EIA Expects Total U.S. Fossil Fuel Production to Reach Record Levels in 2018 and 2019” January 18, 2018
Alternative fuels are an important part of the Trump Administration’s “all of the above” energy policy. But for the Trump administration and undoubtedly a number that will follow, fossil fuels will be the dominant component of that mix.
by Joe O’Brien
Turning the Page on the Next Chapter for Retail Fuel In the world of retail fuel, 2017 will be remembered more for what didn’t happen (the outdoor EMV liability shift, for instance) than what did. Let’s reflect on what transpired this past year, take a look at what the future holds and, in some cases, separate fact from fiction.
Is It Disruption or Distraction? The headlines this past year decried a future supported by traditional fuels. Electric vehicles (EVs) and/or autonomous vehicles are taking over. Petroleum-based fuels are going away. The combustion engine, personal vehicles or gas stations—or all three—will soon go extinct. But if we dig a little deeper, we find that what at first seems like an imminent market disruption might be more of a marketing distraction. It’s true that technology is advancing quickly. Since mid-October the autonomous vehicle division of Google’s parent company, Alphabet, has tested driverless minivans on public roads without a human in the driver’s seat. Truly driverless cars are seeming less like science fiction every day. EV technologies also are improving—miles per charge are going up and development costs are coming down. But in spite of bold commitments by some automakers and international communities to transition away from traditional fuels, history has shown that, in the United States, major market change begins with consumers. Besides, what is applicable overseas isn’t a perfect—or easy—fit here. The driving habits in the U.S. are very different than those in Europe, Latin America and China. The air quality here also is better.
U.S. automakers that are expanding EV product lines are in fact pursuing growth opportunities. But those opportunities are global opportunities.
U.S. automakers that are expanding EV product lines are in fact pursuing growth opportunities. But those opportunities are global opportunities. For instance, GM announced that it will launch 20 new electric and fuel-cell vehicles by 2023. Given the buzz about EV here in the states, it would be easy to assume that GM’s EV expansion is tied to demand in the U.S. But consider this: GM is selling more cars in China than in the U.S., and China is one of the countries aggressively pursuing an automotive future that is free of fossil fuels.
Further, EVs aren’t flying off the showroom floors here in the U.S. In fact, the top three selling vehicles in the U.S. as of November 2017 were three light-duty vehicles: Ford F Series, Chevrolet Silverado and Dodge Ram trucks. That’s not exactly a ringing endorsement for automobiles with the best fuel economy. That notwithstanding, change IS coming. But it will probably take the maturity of today’s youth for EVs to surpass traditional
Turning the Page on the Next Chapter for Retail Fuel
fuels. When there is demand for EVs in the U.S., automakers will answer in kind. But right now, it looks like that demand is likely still 15 – 20 years away.
EMV: A Year Without a Deadline At the end of 2016, the major credit card companies postponed the deadline for U.S. gas stations to update their automated fuel dispensers (AFDs) from October 2017 to October 2020. In spite of the delay, the AFD conversion did gain some momentum in 2017. Here’s a look at where we stand with EMV now, and where we are headed in 2018. The large gas station networks are leading the way in the EMV conversion. Most small and medium independent gas stations are waiting until the bigger chains have converted. Some retailers are already in the testing and certification phase, while many independent gas stations still have yet to develop a firm business plan for addressing the conversion. Some sites are delaying the conversion so they can complete as many upgrades at one time as possible. For instance, marketers who introduce mobile wallet or connected car technologies at their dispenser during a single roll-out will realize cost savings.
The large gas station networks are leading the way in the EMV conversion. Most small and medium independent gas stations are waiting until the bigger chains have converted.
Additionally, some alternative secure payment solutions are emerging. One such alternative includes developing a payment center in the middle of the fuel island instead of including payment technologies at the dispenser. Unfortunately, the deferral of the liability shift is creating a notable sense of complacency that may bite fuel retailers in their bottom line. According to published reports, merchants may still be liable in some instances. If a fuel site has excessive fraud-to-sales ratios and excessive chargebacks, then the merchant is responsible for all lost or stolen fraud and outdoor EMV counterfeit fraud. These merchants could face penalties in addition to chargeback liabilities.
Retailers need to remain vigilant about their site’s payment security. Several recent skimming incidents have been tied to sophisticated, multi-state criminal operations that are organized
Turning the Page on the Next Chapter for Retail Fuel
The General Policy and Funding Changes With the arrival of new leadership at the White House in 2017, many regulatory and funding changes are on the table that will affect the fueling industry. Here’s the score on some of the key issues:
• Debit Swipe Fee Reform: Early this year a proposal to repeal debit swipe fee reform was rejected. This measure continues to protect marketers from absorbing inflated swipe fees issued by banks.
• EPA Budget Cuts: Almost $150 million in funding reductions are proposed for EPA programs. The funding shortfalls could cause states to absorb costs that the EPA previously shouldered. The proposed budget is expected to be voted on by end of 2017.
• E15 Waiver: Legislation to waive the fuel volatility
in nature. Because fraudsters with successful skimming operations harvest millions of dollars in fraudulent charges, criminals will probably milk it for all they can, while they can. With that in mind, the Conexxus Data Security Committee developed a guide for site operators to protect the payment card data at dispensers. One of the recommendations included replacing universal/standard payment terminal door locks with locks unique to the location. Visit the Resources section of the Conexxus website at www.conexxus.org to learn more.
EMV: The Road Ahead Most single-store operators lack IT departments and, therefore, don’t know where to begin with the conversion. But fuel sites that have not committed to a plan for dealing with EMV are taking chances with their future. With the bulk of retail fuel sites taking the wait-and-see approach, the availability of both equipment and technicians will become strained for the hold-outs. All c-store operators who haven’t initiated an EMV plan should reach out to an AFD distributor as soon as possible to start a conversation about potential needs. A qualified fuel equipment representative will help c-store operators assess the EMV needs of their fuel sites and develop a timeline for addressing them before crunch time hits.
standards for E15 stalled. But the issue isn’t altogether dead. The EPA has indicated that it would look into whether or not the agency has the authority to issue a waiver.
• Renewable Fuel Standard: Renewable Volume Obligations (RVOs) for 2018 will be nearly the same as 2017. The total volume will increase from 19.28 to 19.29 billion gallons. The Renewable Fuel Standard (RFS) maintains the 15-billion-gallon ethanol mandate for 2018. The EPA also rejected petitions from refiners and industry associations in 2017 to move the point of obligation downstream to fuel blenders and distributors.
• Fuel Economy: The EPA is reviewing the Corporate Average Fuel Economy standards for cars and light trucks for model years 2022 – 2025. The existing standards call for more reliance on electric vehicles. This “Midterm Evaluation” is due to be completed by April 1, 2018, and is a story to keep an eye on.
• Road Funding: A federal budget proposal includes $200 billion to pay for transportation projects over 10 years. Details for the plan have not yet been defined. An increased fuel tax has not been ruled out. This is definitely another story to watch in 2018. n
THE ABCS OF EMV EMV is highly technical and full of bewildering terminology. Do you know an AID from a CVM? Or the difference between “fallback” and “offline”? U.S. Payments Forum and Conexxus presented an EMV 101 tutorial in fall 2017. Watch the webinar, “Accepting EMV Chip Cards at the Fuel Pump,” at www.uspaymentsforum.org/accepting-emv-chip-payments-atthe-fuel-pump-webinar/. FMNMagazine
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Joe O’Brien Joe is Vice President of Marketing at Source™ North America Corporation. He has more than 20 years’ experience in the petroleum equipment fuel industry. Contact him at firstname.lastname@example.org. 71
A Look at FLEETCORâ€™s Strategic Expansion by Keith Reid
The recent announcement that FLEETCOR Technologies,
Inc. had closed its nearly $700 million acquisition of Cambridge Global Payments, a leading B2B international payments provider, underscored a trend among the dominant fleet card providers to branch out from their core markets in pursuit of related opportunities. As the company describes itself: FLEETCOR Technologies is a leading global provider of commercial payment solutions. The company helps businesses of all sizes better control, simplify and secure payment of their fuel, toll, lodging and other general payables.
RETAIL OPERATIONS FLEETCOR is hardly unique in that aspect. Its leading competitor, WEX Inc., has built up similar capabilities in similar markets. Fuels Market News spoke with John Coughlin, FLEETCOR’s EVP of Global Corporate Development to get his perspective on where the company is heading and what these developments mean for its core fleet services business.
How do these new market developments relate to the company’s traditional core competencies and history facilitating commercial fueling transactions?
Coughlin: Clearly our origins are in fleet cards and fuel cards on the fleet side. That was 90 percent of the revenue of the company for the first 10 years. We’ve been around about 18 years. And when we went public, 90 percent of the revenue was still on the fuel cards. But when you think about what a fuel card is, it’s really a payment vehicle that employers give employees to control expenses. So, it’s sort of a B-to-B-to-E product, or what we call a work force payments product, locked down to a specific spend category or MIC code. When you think about our competencies, clearly distribution to small businesses is a big one. Then issuing, processing and networks are the card capabilities. And then there is this management skill set developed in our legacy business where you realize our customers spend money on a lot more things than fuel, and why don’t we give them some payment solutions to help pay for those goods and services? So that led to the evolution of where we are today.
FMN: The expansion has been gradual over the years. What is FLEETCOR’s footprint today?
Coughlin: Less than half of our
revenue today is from fuel cards, and we have diversified into five adjacent categories. In addition to fuel we have hotel cards, through a discount hotel
A Look at FLEETCOR’s Strategic Expansion
But when you think about what a fuel card is, it’s really a payment vehicle that employers give employees to control expenses. So, it’s sort of a B-to-B-to-E product, or what we call a work force payments product, locked down to a specific spend category or MIC code. John Coughlin, FLEETCOR
payment vehicle and network called CLC. Then we have corporate payments, which is really companies’ CFOs, treasurers and heads of accounts payable departments using a virtual card product to pay their vendors on AP. We also have a road toll business. A huge expense for fleets is paying tolls so we own the top toll company in Brazil, and we have toll products in Europe. And then we have a gift card product solution where we provide the loyalty and gift card platforms for major retailers.
So, we’ve evolved over time so that we now think of ourselves as a type of commercial payments company, but we’re not an AMEX card where you can buy any category. Most of our payment products are locked down to specific spend verticals.
FMN: While some of these seem
to be outside your core markets, you can clearly see some crossover opportunities with your legacy fleet card customers.
Coughlin: I think the one that might be most relevant is corporate payment. Companies pay a lot of bills— FMNMagazine
accounts payable. When we bought Comdata in 2014, everyone knew Comdata for their North America trucking fuel card business, but half their operations were the corporate payments business. With that you go to a business owner or CFO or treasurer and say, “Hey, you have maybe five people in your AP department paying all these bills. Why don’t we take that over and do a full AP disbursement for you?” They let us know who to pay and if they want certain vendors to be paid by wire or ACH. But, we’ll pay as many of them as we can on a virtual card, which is a sort of a onetime-use MasterCard. In doing so we’ll get interchange for those purchases. Typically, corporate B2B interchange will be 2.65 percent. So not only will we take away a lot of your costs in the AP department, but I will give you a rebate on your spend that’s on the card.
FMN: That creates an interesting incentive.
Coughlin: If we can migrate half of
the spend on the card, we’ll give a certain amount back as a rebate. For the first time, the AP department now becomes a revenue center. You’re getting rebates on your spend.
FMN: How does the recent Cambridge acquisition fit in?
Coughlin: This may be less
relevant to your readership, but when you go to a CFO or treasurer of a medium-sized company, most of its bills will probably be domestic vendor payments. But, it may be a manufacturer sourcing product from Germany or Japan or China. And it has to settle those bills in those local currencies. That’s what Cambridge does— international accounts payable payments. We have Comdata doing the domestic accounts payable, Cambridge doing the international and we can pay AP in 140 different currencies. The international AP market in terms of revenue for companies like FLEETCOR is just massive. It’s even bigger than the domestic payment opportunity.
[Fleet cards are] a big part of the company and a big part of what we do. I think we just came to realization that the best end game would be that if we’ve got a distribution machine that can sell to customers, why not be able to sell them more than one thing? That doesn’t mean you lose focus of your heritage and your core base. John Coughlin, FLEETCOR
Actually, a lot of our readership has business that crosses borders, at least in North America. Just how complicated are international AP payments that close to home?
Coughlin: If you’re a U.S. company and you have a vendor in Canada, you have to first convert the payment into
A Look at FLEETCOR’s Strategic Expansion Canadian dollars. Then, with sending any money abroad post 9/11, there are a whole bunch of regulations that have come into effect. You have KYC—Know Your Customer—who are you sending the money to? And you have AML—Anti-Money Laundering. You have to report to the federal government where are you sending the money abroad to make sure no one is funding anyone who is shady. Both Comdata and Cambridge are licensed as money transmitters in all 50 states.
best end game would be that if we’ve got a distribution machine that can sell to customers, why not be able to sell them more than one thing? That doesn’t mean you lose focus of your heritage and your core base. We still see a lot of growth in the fuel card space and it will always be a big part of FLEETCOR.
FMN: The opportunities seem clear
Coughlin: That’s the endgame. We
and important for a company like FLEETCOR and its investors. But what about concerns among the legacy fleet card market –marketers, retailers and fleet operators—that their needs will still see priority attention?
Coughlin: It’s still half our revenue and it’s growing nicely, and we have thousands of salespeople and service people catering to that market today. It’s clearly a big part of the company and a big part of what we do. I think we just came to realization that the
FMN: Will all customers, including the fleet card space, benefit from efficiencies with your expansion?
have a proprietary, custom-built system called Global Fleet Net which we developed internally over seven years spending well in excess of $100 million, with the goal of consolidating our platforms over the long run. We now run all of Shell’s card processing globally—I think it’s 30 plus countries on our Global Fleet Net system. So, it’s clearly battletested and chosen by some big oil companies and we’ve converted several of the companies we’ve acquired to GFN and that migration continues. n
by Brian Derge
It’s Time to Phase Out Out-Dated Phase Separation Detection Devices
Most U.S. gas stations already sell E10 as their predominant
fuel. The number of stations selling E85 increased over 300 percent from 2006 to 2016. And the number of U.S. stations offering E15 has more than doubled since 2016. Ethanol is solidifying its place in the supply chain. The increased distribution of ethanol has given rise to one of retail fuel’s most unforgiving cautionary tales: phase separation. This in-tank catastrophe has destroyed hundreds of thousands of gallons of inventory across North America and resulted in untold losses in customer loyalty. Making matters worse, tank-monitoring systems that produce false phase separation alarms—a common problem for fuel retailers—increase the likelihood of distributing contaminated fuel. Site operators, frustrated by the false alarms, sometimes make imprudent compliance management choices. These decisions put station equipment, customer loyalty and profits at risk. Fuel marketers who understand how phase separation occurs and what new tools are available to help prevent the distribution of contaminated fuel will be in the best position to protect their bottom line.
It takes very little water to cause phase separation, a process that can lead to four distinct layers of inventory inside the tank.
Water can enter the tank through the spill container during fuel delivery. Water intrusion in tanks containing ethanol can lead to phase separation.
The Truth About Phase Separation To skeptics, phase separation is little more than an urban legend circulating within the fuel industry. But to stations that have suffered its ill effects, it’s an indisputable source of financial regret. Here’s what every fuel retailer who has experienced phase separation has learned the hard way: water is the enemy of fuel. Every fuel tank has some water in it. Too much water, though, can cause a reaction inside tanks containing ethanol. The reaction creates a concentrated layer of water and corrosive ethanol. If this aqueous ethanol fuel is pumped into vehicles, it can damage automotive engine components. Ethanol is an alcohol fuel. When enough water in the tank mixes with ethanol-blended fuel, the ethanol absorbs the water molecules. The water-saturated alcohol molecules become too heavy to remain suspended in the gasoline solution. These water-laden alcohol molecules plummet to the bottom of the tank. This precipitation creates layers of
Water can enter the tank through a bad riser cap or service fitting. Water intrusion in tanks containing ethanol can lead to phase separation. different mixtures of product within the tank, including an alcohol and water (aqueous ethanol) layer. Unfortunately, it takes very little water to cause phase separation. For instance, water can collect in the spill container during a rainy fuel delivery or water can seep in through a bad riser cap gasket or service fitting. In a tank with 10,000 gallons of E10, it takes just 40 gallons of water to cause phase separation. When phase separation occurs, the aqueous ethanol layer is often right where the pump’s in-take tube draws fuel into the dispensing system. Not only does fuel that has completed phase separation put automotive engines at risk of failure, the aqueous ethanol can damage dispensing equipment. Once phase separation has occurred, station operators face several shortterm consequences—all of which are costly: pump down-time, inventory loss, the expense of purging contaminated fuel from the system and disposal fees. In the long-term, a station that has had an incident with phase separation will lose future sales (and credibility) when word spreads that the station distributed bad gas.
Understanding the Limitations of Floats
indication that phase separation is nearing, they simply issue an alarm.
There are many misconceptions about the capabilities of various phase separation detection devices available today. Understanding the limitations of certain types of devices and the benefits of others can mean the difference between timely intervention and costly consequences. In-tank phase separation detection is available in two basic styles: a weighted float or density sensor. Which style of device is inside your tanks largely determines whether or not your site experiences false phase separation alarms. Fuel density is an indication of product quality. Obviously, water and phase separation compromise product quality. But fuel density is also affected by temperature. Floats lack the ability to account for temperature changes in the tank. They can’t distinguish between fuel that has undergone phase separation or fuel that has experienced a sudden temperature fluctuation due to a routine delivery. That is how false phase separation alarms occur. Here’s a real-world example of how a false phase separation alarm happens in a system utilizing float-based phase separation detection: Fuel inside an underground storage tank stays cool even when it is sweltering outside. But, on warm days fuel inside a tanker heats up. During a fuel delivery, the hot fuel is rapidly added to the cool inventory in the tank, causing density fluctuations. Float-based phase separation detection devices are weighted to the density of aqueous fluid (800 kilograms per cubic meter). When hot fuel is added to a tank, sometimes the fuel density will rise above 800 kg/m3. This causes floatbased systems to issue a false phase separation alarm because, unlike detection devices with a density sensor, the floats cannot provide temperaturecorrected density readings. Although the fuel quality is actually within an acceptable range, the monitoring system can’t make the distinction between product that is undergoing a temporary
OPW’s Aqueous Ethanol Float Sensor continuously monitors fuel quality, providing real-time, thermal-corrected density readings. temperature swing and product that has completed phase separation. As a result, the false alarm then triggers the pump motor to shut down. Unfortunately, many site operators frustrated by invalid stoppages have disabled their system’s safety checks to prevent service interruptions. This choice puts the fuel site at an even greater risk of distributing contaminated fuel, a much longer service interruption and more costly consequences.
How Density Sensors Prevent False Alarms Phase separation detection devices that include a density sensor are able to account for temperature changes inside the tank. This capability eliminates false phase separation alarms. OPW’s Aqueous Ethanol Float Sensor, for instance, constantly monitors the fuel density inside the tank and net-corrects for thermal changes. Readings are continuously streamed to the tank gauge. Detection solutions that include density sensors offer the benefit of being able to issue a warning in addition to an alarm. Float-based monitoring solutions are unable to do this because they are weighted to a specific density. Either the float has risen enough to trigger an alarm or it has not; there is no in-between. Because float-based devices do not continuously monitor fuel quality, they do not offer the operator an FMNMagazine
Tank gauges from OPW can be configured to issue a warning and then an alarm at user-defined thresholds. This ability to be notified early that conditions inside the tank could lead to phase separation empowers operators to initiate corrective actions before contaminated fuel is dispensed and causes a catastrophic engine failure. If a potential phase separation problem is occurring, operators utilizing a modern density-sensor based system can delay a delivery, which would stir up the contents of the tank and increase the potential for phase separation. The operator can then remove as much product from the tank as possible before further saturation happens. Then a new load of fuel can be dropped. For this operator, the situation becomes more about inventory management than crisis intervention.
The Ethanol Age Is Here As the automotive fleet continues to turn over, more vehicles approved to fuel higher ethanol blends will hit the highways. Attracted by the price break that higher ethanol blends provide, consumers will be empowered to take advantage of the savings. Fuel marketers need to address this shift in their fueling equipment. A tank-monitoring system that includes modern phase separation detection is essential to meeting the quality assurance needs of the ethanol age. Fuel site operators who leverage the benefits of a density sensor in their phase separation detection will prevent costly inventory headaches from crippling their forecourt. They will also realize more efficient daily operations, know they are dispensing quality fuel and win with customers in the long-run. n About the Author:
Pete Neil is Global Product Manager at OPW Fuel Management Systems. Contact him at Pete.Neil@Doverfs.com. For more information about OPW Fuel Management Systems, visit www.opwglobal.com/opw-fms.
Motor Fuels Retail Overall, 79.1% of convenience stores (122,552) sell motor fuels, a decrease of 1.0% (or 1,255 stores) from 2016, with the single-store motor fuel segment dropping by 1,025 stores. The decline in the number of convenience stores selling fuel is reflective of retailers evolving their business models to focus more on the in-store, foodservice offer, as well as retailers embracing new store formats and establishing their brands in more urban, walk-up locations. NACS: â€œU.S. Convenience Stores Continue Growthâ€? January 25, 2018
Convenience stores can have far greater profit margins with far fewer headaches in just about any product/service they offer aside from gasoline. But the value of fuel to store traffic drives that nearly 80% to carry fuel. And with good management, supplier partners and technology, fuel can earn the retailer a few bucks as well.
FUELS MARKET NEWS
DTN TIMS Supply Forecasting Intelligence and Pipeline Schedules Offer Increased Visibility and Greater Inventory Control DTN, a leading information services company, announced the launch of its newest enhancements to its Terminal Inventory Management System, DTN TIMS®. The latest version further improves operational forecasting by introducing pipeline schedule data to increase insights, enable data-driven decision making and provide greater control of fuel inventory. The introduction of advanced forecasting options in the latest version of DTN TIMS allows batch quantities from pipeline schedules to be included in the dashboard, improving forecasting intelligence, providing better visibility into future inventory positions. Batch numbers and, if available, nomination numbers are automatically passed and
notated in the forecast. This improves forecast intelligence and allows for easier management of inventory from one data source at an enterprise level rather than assessing data from multiple portals and spreadsheets to perform the same task. n
Trinium Fuel Software Has Record Year in 2017 Trinium Technologies, a leading provider of business software for fuel marketers and distributors, has announced a record year in 2017 for customer acquisitions and revenue for the fuel software division of the company. Trinium was able to bring on a record number of customers to the company’s fuel software applications, exceeding customer acquisition and revenue goals in 2017. As fuel marketers look to modernize their software, Trinium’s SaaS (software-as-a-service) offering is seen as an affordable solution in the wholesale fuel industry with its broad scope of functionality, ease of use, and low technical burden on the customer. Fuel marketers are able to ramp up quickly on the software with FMNMagazine
very little required on the customer’s side, just PC’s with internet access. “The increased demand for our fuel software is mainly due to the positive feedback we get from our loyal customer base. Our customers really drive our product scope, enhancing the system for them makes the system more marketable to other fuel distributors”, said Dennis Lane, vice president of sales and marketing at Trinium Technologies. Much of the customer growth came in the cardlock segment of the market, where Trinium’s best-of-breed cardlock application, Trinium-CMS, continues to lead the industry. Trinium-CMS provides functionality to manage network cards from Pacific Pride, CFN, and Voyager; along with proprietary cards. Trinium’s fuel applications are also used for wholesale fuel distribution, bulk fuel, lubes, and other packaged products; with an integrated accounting system for a complete enterprise solution for fuel marketers. n
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Quarles Petroleum Acquires Propane Distributor Noblett Northern Neck Gas Quarles Petroleum, Inc., a regional provider of residential and commercial fuel, has acquired the propane gas distribution business of Noblett’s Northern Neck Gas in Kilmarnock, Virginia. Quarles will transition the Northern Neck Gas operations into the current service center office located at 11549 History Land Highway in Warsaw, Virginia. Noblett’s Northern Neck Gas was the first bottled gas supplier in the Northern Neck, delivering propane for cooking, hot water, pool heaters, gas dryers, generators and heating since 1939. The Hudnall family has owned and operated Northern Neck Gas since 1981 and will retain ownership of Noblett Appliances in Kilmarnock. Established in 1940 as a one-truck oil company in Warrenton, Virginia, Quarles Petroleum is a regional provider of residential propane and oil, commercial delivered fuels, fleet card sites and services, and lubricants. n
KAG Customers Support Driver Pay Increases The Kenan Advantage Group, Inc. (KAG), a leading North American bulk transportation and logistics provider, has announced that the overwhelming majority of its customers have partnered with the company to support pay increases for its drivers. In late September 2017, KAG announced the implementation of a pay increase strategy designed to proactively address the rapidly worsening driver shortage issue facing the entire trucking industry. As a result of the successful campaign, which includes finalizing details with a few remaining customers, the promised 2018 driver pay increases for KAG drivers went into effect on January 1. The program calls for guaranteed pay increases for the next three years to help elevate driver pay to levels that successfully attract new drivers required
to meet the capacity and growth needs of the organization’s blue-chip customer base. This requires securing rate increases from the company’s customers to help fund the pay initiative.s. n
Mansfield Energy Announces the Formation of Mansfield Cares, Inc. Mansfield Energy Corp, a leading energy supply and logistics provider, announced the formation of Mansfield Cares, Inc., a 501(c)(3) charitable non-profit entity. The goal of the foundation is to expand Mansfield’s philanthropic efforts and enable donors to easily support multiple causes around the country. “For the past 31 years, Mansfield has raised over $6.5 million for the Muscular Dystrophy Association with our annual charity Golf Classic,” explains Michael Mansfield, Chief Executive Officer of Mansfield Energy. “We have also supported numerous other organizations across the country including the American Red Cross, Boys and Girls Clubs, The Salvation Army, KidSport, and Second Harvest Heartland. The formation of Mansfield Cares allows donors to support the Mansfield work and mission which benefits multiple charities.” Mike Davino, a twenty-year veteran with Mansfield, will serve as the Executive Director of the Mansfield Cares organization. n
PDI Acquires TouchStar Group PDI, a leading global provider of enterprise software solutions to the convenience retail, wholesale petroleum, and logistics industries, announced it has acquired TouchStar Group LLC, a multinational logistics automation company. The acquisition expands PDI’s product offerings into enterprise mobility software and automation systems, which transform business productivity in the oil and gas, transportation and aviation operations industries. TouchStar’s webbased integrated platform helps customers simplify the management of fleets and mobile enterprises around the FMNMagazine
world. TouchStar’s global customer base and infrastructure, and its sophisticated mobility and fleet automation solutions, complement PDI’s comprehensive logistics solutions suite. The acquisition gives PDI additional industry and solution knowledge, particularly in enterprise mobility; a global infrastructure from which it can continue its track record of international growth; a marquee, global customer base; and a scalable cloud-based addition to PDI’s comprehensive logistics platform. TouchStar sells and delivers its software primarily through a SaaS delivery model, and the acquisition will allow PDI to provide customers with a choice of solutions whether it be on premise, in the cloud or both. n
Ascentium Capital Exceeds $1 Billion in Funded Volume During Fiscal Year 2017 Ascentium Capital LLC, a leading national private-independent finance company, announced it surpassed $1 billion in annual funded volume for the first time in the organization’s history. The Company manages $1.9 billion in assets and funded $3.7 billion since 2011. Ascentium Capital has over 300 employees including a national salesforce of 125 finance professionals. The Company will expand the size of the sales team in 2018, continue to enhance the Ascentium University sales training program and invest in strategic technology initiatives. As a direct lender, Ascentium Capital LLC specializes in providing a broad range of financing, leasing and small business loans. The company’s offering benefits equipment manufacturers and distributors as well as direct to businesses nationwide. Ascentium Capital is backed by the strength of leading investment firm Warburg Pincus LLC. n
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WEX Announces Fleet Card Contract with Verizon WEX Inc., a leading global provider of corporate payment solutions, announced a three-year fleet card contract with Verizon, which operates one of the largest private vehicle fleets in the U.S. WEX will provide more than 25,000 fleet cards to Verizon and will provide the communications company with additional insight into its fleet operations using WEX’s proprietary ClearView analytics platform. ClearView – a data visualization tool that’s unique in the fleet industry – provides actionable data to help companies identify long-and short-term trends, efficiencies and cost-saving opportunities. n
MCC for SI Group’s Family of Antioxidant Products MidContinental Chemical Company, Inc. (MCC) is celebrating its 10+ year relationship with SI Group. MCC represents the ETHANOX® and ISONOX® antioxidant product lines for the fuel and lubricant industries in North America. ETHANOX® and ISONOX® lubricant antioxidants enhance thermal and oxidative stability, improve lubricant performance and reduce sludge formation, extending the useful life of lubricants in virtually any application. They reduce thickening and inhibit acid formation in a variety of applications, including engine oils, automatic transmission fluids, industrial oils, compressor oils, hydraulic oils, grease and metalworking fluids. SI Group’s line of ETHANOX® and ISONOX® fuel antioxidants maximizes the storage life of many fuels and protects fuel systems by increasing resistance to oxidation. Additionally, they also help control insoluble gum formation. What’s more, ETHANOX® and ISONOX® fuel antioxidants also meet military specifications for many aviation fuels. To support the expanding use of biodiesel fuels worldwide, SI Group offers an array
of biodiesel antioxidants that stabilize fuels and prevent deposit formations in diesel engines. n
DM2 Software launches CardLink 2017 DM2 Software, Inc., a leading provider of software solutions for petroleum marketers, is pleased to announce the latest release of its flagship CardLink cardlock management and billing application. Debuting when DM2 first opened for business in 1989, CardLink is used by marketers to invoice CFN, Pacific Pride, Voyager and proprietary fleet fueling card transactions. In addition to the dozens of new features designed to help marketers manage multiple networks and increase their cardlock margins, this new release is also 100 percent compatible with Sage 100’s new Business Object Framework programming architecture. The new Framework architecture gives DM2 customers a choice of using the standard ProvideX or Microsoft® SQL Server data platform for their system’s database as well as the ability to use Sage’s Customizer module on all of their CardLink tables and most of their user interface menus and screens. This gives CardLink users the ability to create multiple report settings, user defined fields and tables and customizable grids. And, since all reports are now Crystalbased, every report can be easily modified to meet customers’ specific needs. In addition to the standard features included, DM2’s new CardLink 2017 release offers an optional interface to POWERUP FLEET’s price/margin analysis service. n
New BlueDEF Storage and Dispensing Equipment Old World Industries, LLC announces the launch of its new BlueDEF Storage and Dispensing Equipment. In 2010, environmental regulations required the use of diesel exhaust fluid (DEF) in most diesel and off-road vehicles. Over the FMNMagazine
next 10 to 15 years, as older vehicles are rotated out of the market and replaced with more advanced engine platforms, annual DEF consumption is expected to exceed two billion gallons, as reported by Integer Research. As a leader and innovator in the industry, Old World Industries is always looking to improve its product offering. After thoroughly testing for the past 18 months in both the lab and real-world conditions, Old World is excited to launch a new product portfolio ranging from basic hand pumps to bulk storage and dispensing systems for retail and commercial applications. A highlight of the new offering from this BlueDEF portfolio are the Plug and Pump Storage Systems. Available in 396, 660 and 1,320-gallon options, these self-contained storage and dispensing systems cost significantly less to install than others in the industry. Not only is this system functional and reliable, it is easily relocatable as well. Fleet customers will appreciate the ease of installation, which equals less down time. The system is double-walled and works great in markets where temperatures drop below 12ºF. Designed to meet ISO 22241 quality standards, all BlueDEF Storage and Dispensing Equipment is engineered with 100% DEFcompatible parts to safeguard the sensitive chemistry and meet the high demands of this growing industry. n
Ryder Receives U.S. EPA 2017 SmartWay® Excellence Award Ryder System, Inc., a leader in commercial fleet management, dedicated transportation, and supply chain solutions, announced it has been honored with a 2017 SmartWay® Freight Carrier Excellence Award for improving freight efficiency and contributing to cleaner air within its supply chains. The SmartWay Excellence Award, reserved for the top performing SmartWay Partners, is EPA’s highest recognition for demonstrated leadership in freight supply chain energy and environmental performance. Ryder was one of 62 companies to receive this distinction, representing the best environmental
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INDUSTRY NEWS performers of SmartWay’s 3,600 Partners. The Excellence Awardees were honored at the American Trucking Association’s Management & Exhibition Annual Conference held in Orlando, Fla., in October 2017. The annual SmartWay Excellence Award honors top shipping (retailers and manufacturers) and logistics company partners for superior environmental performance and additional actions to reduce freight emissions through effective collaboration, operational practices, a robust system for validating and reporting their SmartWay data, and communications and public outreach. The SmartWay Excellence Award also recognizes top truck, barge, and multimodal carrier partners that are setting efficiency benchmarks in how they move products and supplies. EPA based its selection on information received from Partners’ annual assessment tool submissions. Ryder has been a SmartWay partner since 2006. The Company was honored with a SmartWay Excellence Award in 2013 and 2014, and also received the SmartWay Affiliate Challenge Award in 2014. n
Paraco Acquires the Business of Bay Gas in Long Island, New York Paraco announced the acquisition of Bay Gas, located in Shirley, New York. A family-owned propane company and founded by Jack O’Loughlin in 1968, most recently operated by his son John O’Loughlin. “This is our second acquisition of 2017 and we are honored to welcome Bay Gas to our family of acquired companies,” said Christina Armentano, V.P. of Business Development at Paraco. “The acquisition offers a unique opportunity to acquire a company known for its first-class service, quality of employees and strong customer presence, especially in Suffolk County and on the east end of Long Island.” Paraco has been servicing Long Island since 1985. With the acquisition, Paraco will increase its customer base on Long Island to 65,000 and will service all of
Nassau and Suffolk Counties from 4 distribution locations in Bay Shore, Bohemia, Riverhead and now, Shirley. n
Penske Logistics Given Sustainability Award by U.S. EPA SmartWay Program The United States Environmental Protection Agency’s SmartWay program has named Penske Logistics a 2017 Excellence Award winner. Penske is among the program’s top 1 to 2 percent of partners that display environmental best practices. Penske Logistics is among the companies that have aided the SmartWay program, dating back to 2004, to avoid emitting in excess of 94 million metric tons of air pollutants and saving more than 197 million barrels of oil and $27.8 billion in fuel costs. Penske Truck Leasing is a transportation industry leader in the areas of spec’ing, operating and maintaining fleets of traditionallyfueled vehicles as well as alternativefueled vehicles that includes natural gas, propane, electric and diesel-electric hybrids. There are over 550 vehicles in the company’s alternative fuel fleet. In over 26 years, Penske has safely operated and maintained natural gas vehicles in excess of 80 million miles. Penske Truck Leasing is an affiliate partner in the U.S. EPA SmartWay program and Penske Logistics is a partner in the trucking carrier and logistics categories. Penske Truck Leasing is also an affiliate partner in the Canada SmartWay Transport Partnership, which is administered by Natural Resources Canada. n
Clean Energy to Supply Dallas Fort Worth International Airport with Renewable Natural Gas Clean Energy Fuels Corp. announced today at the Airports Going Green 2017 conference, that host airport Dallas Fort Worth International (DFW) Airport awarded Clean Energy a renewable natural gas (RNG) fueling contract for the FMNMagazine
airport’s vehicle fleet. The contract calls for Clean Energy to provide the airport with its Redeem™ brand of RNG, the first renewable and commercially available vehicle fuel made entirely from 100% organic waste. The use of RNG has the potential to reduce DFW fleet emissions by approximately 70%. In addition to the fueling agreement, Clean Energy and DFW extended the current operations and maintenance agreement for the airport’s public natural gas fueling stations. The contract stations dispense approximately 2 million gasoline gallon equivalents (GGEs) each year. Clean Energy conducted the design, build, operations and maintenance for the airport’s first natural gas fueling station in 2000 and was selected to build and operate the second station in 2011. n
OPW Introduces the Scalable Petro Vend 200 Fuel Island Terminal OPW Fuel Management Systems, part of Dover Corporation’s Fluids segment, has introduced its new Petro Vend 200 (PV200) Fuel Island Terminal, which features many modular options that make it scalable for a wide range of unattended fueling needs. As a nextgeneration solution in OPW’s new PV Family of Fuel Control Solutions, the PV200 provides state-of-the-art, 24-hour fuel control to unattended commercial fleet fueling operations, big or small. The terminal offers the versatility of many a la carte options, including dual card reader operation, an alpha keyboard and a receipt printer. The PV200 is available in three pedestal sizes, including sizes that meet Americans with Disabilities Act requirements. The PV200’s compatibility with OPW’s FSC3000™ Fuel Site Controller offers comprehensive transaction authorization and tracking capabilities for proprietary house cards and many authorization and commercial fueling networks. Compatibility with OPW’s Phoenix® Fuel Management Software enables users to fully leverage their fueling data through powerful data analytics and comprehensive reporting
INDUSTRY NEWS options. The PV200 features a thermostatically controlled heater and aluminum construction for reliable operation in harsh outdoor environments that sometimes challenge trucking, school transport, government, military, industrial and business operations. In addition, PV200 components can be quickly and easily removed for simplified serviceability. n
Wine Energy/Wi-Not Stop Selects ADD Systems for Back Office Advanced Digital Data, Inc. (ADD Systems®), the leading supplier of software solutions to the convenience store and energy distribution industries, is proud to partner with Wine Energy as their back office software provider. Wine Energy needed a system that would streamline their day-to-day operations. Their business has grown over the years to include delivering petroleum with 30 trucks, operating 11 convenience stores and a Dairy Queen, on-site fleet fueling and HVAC. This past summer, Wine Energy rolled out the latest ADD Systems convenience store software, ADD eStore®. All 11 Wi-Not Stop locations executed July 1st, during the peak summer season for the stores Wine Energy also implemented Atlas Advanced BI®, the latest ADD software for business intelligence and reporting. Atlas provides operational reporting and analytics for the stores with real time POS reporting. In addition to the convenience store software, Wine Energy has implemented ADD software solutions for their fuel oil distribution business, including ADD Energy E3®, the ADD back office solution for energy distribution. They also recently purchased RAVEN®, ADD Systems’ mobile delivery solution, for their delivery trucks. n
Trillium CNG to Provide Upgrades to Fort Worth Transportation Authority Compressed Natural Gas Fueling Station The Fort Worth Transportation Authority (FWTA), has selected Love’s Trillium CNG, part of the Love’s Family of Companies, to provide a series of upgrades to its existing compressed natural gas (CNG) fueling facility. Trillium was selected as the result of a competitive solicitation process. In addition to providing operations and maintenance services, Trillium will upgrade aging equipment, which will help FWTA operate approximately 200 CNG vehicles more efficiently. The private station, located at 1600 E. Lancaster Avenue in Fort Worth, fuels FWTA’s fleet of buses, paratransit and support vehicles, which all operate on CNG. A new gas line supplied by SiEnergy will increase pressure to the fueling station. Trillium will replace three gas-powered compressors to electric-drive compressors, upgrade the dryer and replace all six fueling dispensers. Trillium was also selected to replace the two remaining gas-powered units with new gaspowered compressors. The upgrades will allow buses to fuel faster, while providing a substantial decrease in operating cost to FWTA. All works is expected to be complete by late 2018. Trillium began supporting the FWTA station in 2011 with operations and preventative maintenance services. Over the years, Trillium FMNMagazine
INDUSTRY NEWS replaced one compressor, one gas dryer, and most recently performed a controls and valve panel upgrade. n
Gasboy® Fuel and Fleet Management Solutions Available Through NJPA Gasboy, a division of Gilbarco VeederRoot and the industry leader in commercial and industrial fuel and fleet technologies, was recently awarded a contract with the National Joint Powers Alliance® (NJPA) for “Fleet Management and Related Technology Solutions.” This contract will benefit fleet managers in government, education and other nonprofit entities by allowing them to access and source top-rated solutions from an industry leader. NJPA is an organization that provides nationallyleveraged and competitively-solicited cooperative purchasing contracts under the guidance of the Uniform Municipal Contracting Law. It uses its cooperative contract purchasing method to leverage the national purchasing power of its 50,000-member agencies, while streamlining the purchasing process through the consolidation of numerous, individually-prepared solicitations into one national, cooperatively-shared process. These cooperative contracts offer both time and money-savings benefits for users. In effect, members will be able to purchase the products and services of Gasboy and its parent entity, Gilbarco Veeder-Root, more efficiently and at a reduced cost. Gilbarco Veeder-Root offers customers a full range of fuel-related solutions from its Gasboy fuel and fleet management systems, designed to help customers account for every ounce of fuel used in managing their fleets. n
Walmart Selects FLEETCOR as Fuel Payment Provider FLEETCOR Technologies, Inc., a leading global provider of commercial payment solutions, announced today the signing of an agreement with Wal-Mart Stores, Inc. relating to two payment initiatives.
Walmart will begin accepting FLEETCOR commercial payment cards at all 900 owned, operated and branded Walmart and Sam’s Club fueling locations, and more than 2,500 Walmart Auto Care Centers across the United States. As part of the new agreement, FLEETCOR will promote Walmart and Sam’s Club locations to its existing customer base. Additionally, approximately 4,000 Walmart employees who use company vehicles to service the Walmart store network will begin to use FLEETCOR’s fuel cards to make their fueling purchases. This marks an expansion of FLEETCOR and Walmart’s relationship. n
Hatch Loyalty Partners with Buy It Mobility Networks to Bring Commerce and Customer Engagement Solution to Fuel and Convenience Stores Customer engagement and loyalty platform Hatch Loyalty and Buy It Mobility Networks (BIM), a leading ACHbased payment platform that enables retailers to build more meaningful relationships with their customers, announced a new commercial partnership. This collaboration empowers gas stations and convenience stores to develop loyalty programs that offer shoppers relevant and meaningful rewards based on their purchase behavior. BIM’s white-label ACH platform and Hatch’s customer engagement platform that allows consumers to earn points towards discounts will now be fully integrated. This partnership will enable consumers to participate in retailers’ loyalty programs through their mobile apps, triggering personalized marketing offers and communication while simultaneously increasing sales for the retailer. For example, a trucker who pays for fuel with a gas station’s mobile app might be offered a coupon for a sandwich he purchased the last time he visited the same truck stop. BIM enables consumers to pay with their checking account at the point of sale in an easy, FMNMagazine
fast, and secure manner with minimal friction via its streamlined enrollment process and transaction flows. BIM’s white-label platform enables merchants to offer their customers a convenient and more rewarding buying experience that is associated with their brand, while also lowering their transaction fees and fraud expenses via BIM’s proprietary risk platform. n
NCR Becomes First POS and Payment Provider to Achieve EMV Certification with the Wayne iX PayTM Secure Payment Platform NCR Corporation, a global leader in omni-channel solutions, today announced it has received certification for outdoor EMV solutions with Wayne Fueling Systems (Wayne), part of Dover Fueling Solutions and a global provider of fuel dispensing, payment, automation and control technologies for retail and commercial fuel stations. The certification covers NCR Epsilon, which enables credit and debit EMV transactions for the NCR RPOS and StorePoint POS solutions. The Wayne iX Pay™ payment platform has consistently been the first to meet the industry’s rigorous regulatory demands to help deliver an increased level of payment security. By having an NCR outdoor EMV certified solution, retailers who encounter high risk fraud and have locations subject to high fraud rules can implement EMV payments outdoors and help reduce their exposure to chargeback expenses. NCR’s strategy as a hardware-enabled, software-driven business is to provide unified commerce offerings that converge point of service, loyalty, mobility, eCommerce and payments so retailers can engage with consumers more securely in a variety of ways. n
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Excentus Introduces Tools to Give CPG Manufacturers Direct Access to Convenience Retail Shoppers and Their Data Excentus, a provider of loyalty technology and marketing solutions to national and regional brands, convenience retailers, grocers, and consumer packaged goods (CPG) manufacturers, is launching new products and solutions to increase sales and improve promotions for CPG manufacturers. Through Excentus’ retail programs, CPG brands will have unparalleled access to millions of shoppers, helping them better understand exactly who their customers are through SKU-level data and personally identifiable consumer information. CPG manufacturers can in turn identify new opportunities to deliver the right branded offers and promotions to the right audiences and drive product movement. According to Excentus’ internal program data, customers spend 2x more inside cstores when they belong to a loyalty program, and nearly 6x more if they are engaging with valuable offers. CPG brands can leverage Excentus’ direct-toconsumer communication channels through the Fuel Rewards® program and other Excentus-supported retail programs. This puts CPG brands front and center at thousands of retail locations nationwide with offers that change consumer behavior and accelerate product sell-in with their retail partners. n
TransMontaigne Partners L.P. Announces Agreement to Acquire Two West Coast Refined Product and Crude Oil Terminals from Plains All American Pipeline, L.P. TransMontaigne Partners L.P. announced that one of its wholly owned subsidiaries has entered into an agreement to acquire the Martinez Terminal and Richmond Terminal from an affiliate of Plains All American Pipeline, L.P., for a total purchase price of $275 million. The acquisition expands the Partnership’s storage and terminaling footprint into the San Francisco Bay Area refining complex. The acquisition is expected to be financed through the proceeds of a common unit offering and cash available from other sources. The closing of the acquisition is expected to occur on or about January 1, 2018, subject to customary closing conditions. The West Coast Facilities include two waterborne refined product and crude oil terminals with a total of 64 storage tanks with approximately 5.4 million barrels of storage capacity. n
CarriersEdge Now Offers Vehicle Inspection Courses in Spanish CarriersEdge, a leading provider of online driver training for the trucking industry, is now offering Vehicle Inspection training courses in Spanish. The modules, 10 in all, provide a full scope of training material for drivers and are available in two versions: straight trucks and tractor/trailers. The material educates and tests drivers in the requirements needed for proper inspections, as well as proper reporting. Other Spanish courses offered through CarriersEdge include Defensive Driving and Hours of Service. Overall, CarriersEdge features a library of more than 70 full-length and refresher/remedial courses on important safety and regulatory topics in trucking, from securing loads to handling hazardous materials. All CarriersEdge courses are interactive to reinforce the concepts presented, and quizzes and tests give drivers immediate feedback on
comprehension. Courses can be taken any time and any place drivers have access to a computer or mobile device and an internet connection, giving them the flexibility to keep up-to-date with training while traveling or at home. CarriersEdge combines those courses with a system of management tools allowing fleet managers to track training efficiently. n
Onboard Dynamics Announces Launch of Mobile Natural Gas Compressor Onboard Dynamics (ObDI), an innovator in alternative refueling technologies, today announced the launch of its GoFlo™ CNG-80 mobile natural gas compressor for commercial use. To meet the anticipated worldwide demand, ObDI has formed a strategic business relationship with Linamar Corporation, a diversified global manufacturing company, to provide expanded capabilities as the exclusive
manufacturer of the GoFlo product. The compression capacity of the GoFlo CNG-80 compressor makes it cost-effective for smaller fleets of compressed natural gas (CNG) vehicles, as well as for the initial deployment of CNG vehicles in larger fleets. Because of the compressor’s modular design, fleet operators can expand their CNG vehicle inventory by adding GoFlo units as demand increases, without needing costly electrical power upgrades. The GoFlo compressor is also easy to relocate in the event that a CNG fleet needs to be redeployed, and the unit can serve as a backup to dedicated CNG refueling stations. In addition, freedom from electricity strengthens the operating reliability of CNG fleets in the event of a natural disaster. A limited number of GoFlo CNG-80 systems will be available for delivery the second quarter of 2018 before production ramps up the second half of the year. n
Choice Analytical Inc. Receives ASTM D8148-17 Method Choice Analytical Inc.’s technique and instrumentation have been designated as the ASTM D8148-17 Standard Test Method for the spectroscopic determination of haze in fuels. This new test method and instruments, The Choice Analytical Clarity Choice hz and Color Choice hz, provide an efficient and effective alternative to the highly subjective visual grading method D4176 Procedure 2, which is currently being used in the majority of laboratories across the world. The ASTM D8148-17 method involves a spectroscopic procedure, which determines the level of suspended water and/or particulate contamination, or haze, in liquid light and middle distillate fuels, including those blended with synthesized hydrocarbons or biofuels. In addition to the conventional haze rating system, the ASTM D8148-17 method provides its user with a much more definitive Haze Clarity Index (HCI). This index breaks the clarity of the fuel into a proprietary 100 – 50 rating scale, with 100 as the most optically clear. The Choice Analytical Clarity Choice hz and Color Choice hz use a unique set of optics to achieve unparalleled precision in what was formally a decades old visual rating system. n
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Test Your FMN Acumen
The list below represents acronyms used in this issue of Fuels Market News. /b ACE AFD AML API ATSM ATRI BP Btu CAFE CARB CFI
CNG COP21 CPP CSA CUV E10 E15 E85
ELD EMV EPA EV GDP GFN
Per Barrel American Coalition for Ethanol Automated Fuel Dispenser Anti-Money Laundering American Petroleum Institute American Society for Testing and Materials American Transportation Research Institute British Petroleum British Thermal Unit Corporate Average Fuel Economy
California Air Resources Board Cold Flow Improver
Cold Filter Plugging Point Compressed Natural Gas United Nations Climate Change Conference
GPW HCI HGL HOS kbpd kg/m3 KYC LTO MIC MMbpd mpg NACS NBB NERA NHTSA
Crossover Utility Vehicle
OTR POS ppb RFS RIN
15% Ethanol, 85% Gasoline
Clean Power Plan Compliance, Safety, Accountability
10% Ethanol, 90% Gasoline 85% Ethanol, 15% Gasoline Electronic Control Module (U.S.) Energy Information Administration
Electronic Logging Device EuroPay MasterCard Visa (U.S.) Environmental Protection Agency Electric Vehicle Gross Domestic Product Global Fleet Net
Gross Product Value Haze Clarity Index Hydrocarbon Gas Liquids Hours of Service Thousand Barrels Per Day Kilogram per cubic meter Know Your Customer Light Tight Oil Market Identifier Code Million Barrels Per Day Miles Per Gallon National Association of Convenience Stores National Biodiesel Board National Economic Research Associates
National Highway Traffic Safety Administration
Over the Road Point of Sale Parts Per Billion Renewable Fuel Standards Renewable Identification Number Return on Investment Renewable Volume Obligation
Reid Vapor Pressure
Society of Independent Gasoline Marketers of America Stock-Keeping Unit
Short-Term Energy Outlook Total Cost of Ownership Vehicle Miles Traveled
Wax Anti-Settling Additives West Texas Intermediate
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ADD Systems............................................19 American Coalition for Ethanol......................60 Argus.....................................................55 Ascentium Capital..................................... 43 Biobor................................................... 28 Biomass Conference & Expo......................... 49 Bravo Systems......................................... 23 Cummins & White, LLP............................... 27 Dennis K. Burke, Inc................................... 16 DM2......................................................14 Eastern Energy Expo.................................. 87 FuelConnect 360.................... Inside Back Cover Fuels Market News.................................... 83 Lock America........................................... 88 MidContinental Chemical Company..........52 – 53 North American Bancard............................. 32 NPGA.....................................................75 OmegaFlex............................................. 24 OPW....................................................... 5 RDM........................................... Back Cover REG........................................................ 8 SkyBitz............................... Inside Front Cover Source....................................................11 Southwest Fuel & Convenience Expo...............69 The Pipeline + Energy Expo..........................85 TMC................................................45 & 51 Trinium.................................................. 70 ValvTect............................................ 36 – 37 World Gas Conference................................ 64
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