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Price Volatility, Storm Preparedness Keep US Energy Industry Players up at Night
Green Technology Featured Articles
June 06, 2013

Price Volatility, Storm Preparedness Keep US Energy Industry Players up at Night

By Cheryl Kaften
TMCnet Contributor

The results of a recent poll indicate an increased focus among U.S. energy industry leaders on addressing fuel price volatility and margin visibility, preparing for severe weather, exploring the potential of liquid natural gas, and achieving energy independence.


The “Eye on Energy” survey was conducted among registrants at GRAIL, an industry meeting held in April, on behalf of FuelQuest— a Houston-based on-demand software and services company for the global downstream energy industry.

“At our recent GRAIL conference, industry leaders engaged in spirited discussions concerning trends and issues that affect all businesses that buy, sell, or transport bulk fuels,'' said FuelQuest President and CEO Matt Tormollen, adding, "The “Eye on Energy” survey underscored the need for strategic planning and technology automation initiatives that tackle emerging opportunities, as well as addressing tactical fuel and tax management challenges today."


Above, emergency operations in New York City after Superstorm Sandy (image via Shutterstock).

Specifically, the poll revealed:

Fuel price volatility requires new ways to manage margins. Prior to 2004, fuel buyers were less concerned with day-to-day price changes—largely, because moves of $0.05 or more occurred infrequently (about 1.5 percent of the time). Today, they happen more often (up to 25 percent of the time). Worse yet, price swings of $0.03 are to be expected (at a nearly 50 percent frequency —up from 6 percent pre-2004). According to survey respondents, the following top three strategies would help retailers navigate these price swings:

  • Real-time margin visibility (31 percent)
  • Diversified supply portfolio and options (26 percent)
  • Improved demand forecasting (22 percent)

More actions, and fewer words are needed to achieve energy independence. Most Americans share a desire for energy independence, but a debate has raged for the past 30 years on how to achieve it. Although recent attention has focused mostly on divisive solutions, such as the Keystone Pipeline, or on alternative sources of energy, survey respondents indicated the following are the most urgent drivers for gaining energy independence:

  • Alternative sources of energy, such as biofuels, solar power, wind power (37 percent)
  • Increased oil exploration (18%) or, specifically, increased Arctic exploration (7 percent)
  • Less regulation (13 percent)

A minority of respondents said "stay the current course," signaling an industry call for more action (2 percent).

Severe weather necessitates preparedness. The total number of global tropical storms continues to rise and now approaches 80 to 90 each year. Companies know that they must prepare for severe weather to maintain business continuity and to aid in recovery efforts within their community. According to survey respondents, ahead of a hurricane or other significant supply- and demand-disrupting event, fuel retailers should focus on establishing the following:

  • Emergency preparedness plan (18 percent)
  • Contracted supply of fuel (13 percent)
  • Established communication plan (13 percent)
  • Secondary or tertiary fuel supply arrangements (13 percent)

Natural gas liquids are an interesting option. With NGL prices well below traditional fuel prices, survey respondents are examining CNG and LNG as potential portfolio fuels. In fact, 20 percent are reviewing adoption options today, and 18 percent plan to adopt within the next five years. Respondents also cited availability of fuel sources (18 percent) cost of conversion (16 percent) and tax incentives (16 percent) as the top three areas that will impact their future plans for NGLs.

Excise fuel taxes need a revamp. Driven by shrinking tax revenues due to more fuel-efficient cars, less miles driven, and non-inflation adjusted taxes; states are looking closely at introducing new legislation to increase revenue. In fact, in the last year alone, there were 522 motor fuel tax changes in the United States. While there is great debate at the state and federal level on the appropriateness of higher taxes or changes in tax law, survey respondents recommended these changes as ones the government should consider for motor fuels:

  • Simplified forms and processes (24 percent)
  • Streamlined and consistent processes across all the states (22 percent)
  • Required electronic filing (16 percent)

FuelQuest conducted this survey in-person during its GRAIL conference in San Diego, Calif., from April 23-24, among more than 140 fuel and tax executives, managers and professionals with retailers, distributors, suppliers and fleet-based companies in attendance. More than half of the 70 survey participants are industry leaders who annually buy, sell or transport more than 300 million gallons of fuel.




Edited by Alisen Downey


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