Fueling Diverse Options at the Pump

See full published article here.

Transportation in the 21st century may not be at the level of sophistication of Saturday morning cartoons’ favorite family “The Jetsons” yet, but it has come a long way since 1885. Drivers don’t have Rosie the Robot at their beck and call, but today’s technology offers 360-degree cameras to alert those behind the wheel when something — or someone — gets a little too close for comfort. Cars offer automatic emergency braking to reduce accidents and systems to alert drivers when they stray from their lane of traffic, and autonomous vehicles are entering the market rapidly.

With all this innovation in automobile technology, consumers and marketers alike can expect changes at the pump. Fuel marketers can expect to see an increase of motorists
exploring alternative fuel options.

The Rise of E15
The U.S. Energy Information Administration (EIA)’s 2019 report predicts that motor gasoline and diesel fuel retail prices will increase 76 cents per gallon and 82 cents per gallon, respectively, from 2018 to 2050, largely because of increasing crude oil prices. Combine that report with E15, which until recently, was only allowed to be sold nine months out of the year, preventing business owners from capitalizing on the increased traffic E15-dedicated consumers desired in the summer months. Growth Energy, an association that represents ethanol producers, reports the fuel can generate more than 40 percent of total gasoline sales at retail. Because it is approved for more than 90 percent of vehicles on the road today (those newer than 2001), consumers have driven more than 8 billion miles with E15 transactions.

Until recently, the sale of E15 was restricted during summer months. Now E15, or what marketers label as Unleaded 88 or Regular 88, is sold year-round, allowing retailers to offer it during some of the busiest driving times of the year. And while some modifications and maintenance are necessary, Growth Energy said if a retailer is already sourcing pre-blended E15, then most likely the tanks and dispensers will already meet required EPA regulations. Growth Energy also offers an entire marketing and branding playbook (www.growthenergy.org/resources/retailer-hub) that can guide fuel retailers in planning their marketing strategies.

Implementing E15 at Your Gas Station
While some may be eager to adapt to the changing fuel market, before retailers jump at the opportunity to offer new energy solutions, checking equipment for compliance is imperative.
• Underground Storage Tanks. Most USTs currently installed are compatible with E15, but updates may be required. The EPA issued regulations surrounding UST pipe dope and sealant compatibility. If incompatible thread sealant is used, it needs updating before adding E15.
• To Blend or Not to Blend? Consider whether to blend E15 onsite or have it delivered, as both options vary from fuel site to fuel site. Most E15 marketers blend onsite, but more are supplying pre-blended. Whether retailers store the fuel in dedicated tanks or use a blender pump, check for any required upgrades.
• Good Housekeeping. If converting an existing UST to contain higher concentrations of ethanol, the tank needs to be cleaned to remove all water and sediment. Monitor all visible fittings, connections, sump and spill containment covers regularly, as all components are water-tight.

Any marketers considering adding E15 can consult the U.S. Department of Energy’s Handbook for Handling, Storing and Dispensing E85 and Other Ethanol-Gasoline Blends for guidance at https://afdc.energy.gov/files/u/publication/ethanol_handbook.pdf.

Engine experts and consumers are embracing the growing popularity of higher-octane fuels, citing cleaner burning to benefit the environment. Existing drivers who use higher-octane fuels in the 31 states that offer it are often dedicated to those brands.

It may come as no surprise that the majority of the E15 faithful are millennials, who account for much of today’s driving population in the U.S. The millennial generation is responsible for many “greener” trends across multiple marketplaces, and that extends to c-stores and gas stations. Marketing messages that communicate E15’s engine, financial and environmental benefits appeals to millennials.

Other market demographics to consider are customers who want reliable fuel that’s good for their vehicles, which, according to Growth Energy, appeals to men 55 and older who are car enthusiasts. An untapped market for E15 is busy moms looking for more efficient, less expensive fuel alternatives.

Differing Views
While many consumers within the 31 states where E15 is offered are reported as embracing the fuel, PMAA’s legislative conference in Washington, D.C., saw differing marketer views, with many in the Midwest claiming the decision to sell E15 year-round was one made for them. Further, the branding of Unleaded 88 led to claims of deceptive advertising, after many vehicles were revealed not warrantied for fuel blends beyond E10, which begs a conversation between automotive industry leaders necessary for fuel retailers.

Because of those situations, and because of the rigorous efforts suppliers are tasked with in keeping equipment compliant for the sale of E15, many marketers would rather do without. Currently, there is no indemnification provision to protect marketers from liability as a result of UST component leaks. As a result, many marketers are calling for the mandate to be adjusted to reflect current fuel demand, avoiding potential financial burden of replacing equipment.

Implementation of fuel alternatives won’t happen overnight, and it will take substantive legislative efforts to protect fuel suppliers and ethanol producers alike.

Plugging in to Electric Vehicle Trends
Florida has one of the highest number of electric vehicles (EVs) registered in the state, with about 16,600 in 2017. The Auto Alliance, an auto industry advocacy group, puts that figure at 25,155 as of December 2018.

While electric vehicles did not exceed more than 1 percent of market share until 2018, the percentage of electric vehicle drivers is increasing. Consider one of the most popular manufacturers, Tesla. In 2018, Tesla passed the 200,000 benchmark of electric cars delivered to buyers in the United States.

Electric vehicles are taking a while to catch on, but a study by AAA found that as many as 40 million Americans would consider buying an electric vehicle for their next car. And depending on the state and even the city, some drivers may have attractive financial incentives to go electric. What does that mean for petroleum marketers and c-store owners and operators?

Most EV users charge at home, making it difficult to make the case for adding charging stations to traditional fueling options. But with charging taking about a 30-minute wait, those who do find themselves replenishing their electric cars at a gas station may be more likely to spend more time — and money — on food and other purchases at a c-store.

As EVs become more affordable, they may become more popular among drivers who don’t have a garage ready to be turned into a charging station. In an interview with CSP
Fuels, Scott Shepard, a London-based senior research analyst of energy for Navigant Research, said these potential EV adopters will increase demand for charging stations.

It’s all a matter of analyzing costs and benefits, trends, and timing. In a Fast Company article, David Finn, CEO and founder of Tritium, an electric vehicle charging company in which Gilbarco Veeder-Root invested, observed that even if all new vehicles were electric, it would still take years to phase out gas-powered cars.

Whether the slow uptick in popularity of EVs is worth the investment for fuel retailers and c-store operators will continue to be debated, but some companies are dipping their
toes in. Shell and BP have been testing the technology. Chevron partnered with EVgo to add fast chargers at five stores in California. And Giant Eagle Inc.’s GetGo c-stores have added fast-charging stations to four sites in western Pennsylvania thanks to government grants. EVgo also counts Sheetz, Rutter’s and Ricker’s as partners.

While we’re not yet driving around in flying cars with George, Jane, Elroy and Judy, the transportation industry is changing. How will marketers respond to the change?

 

Sources
afdc.energy.gov
http://www.cnbc.com
http://www.cspdailynews.com
http://www.csnews.com
http://www.cstoredecisions.com
http://www.fastcompany.com
http://www.fleetcarma.com
http://www.pluginamerica.org
http://www.reuters.com

 

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