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Fuel Management

Planning for the Unplanned, the Forecasted, and the Not-So-Obvious

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I’m from Texas. More specifically, I’m from Houston. Having said that, I’m long-familiar with the Gulf Coast phenom that spans from early summer to late fall: the mighty hurricane. Yes, my hurricane experience runs the gamut from volunteering for evacuee relief efforts (post-Hurricane Katrina), to being an evacuee myself (pre-Hurricane Rita), to hunkering down with my doomsday supply of water and canned food while watching the neighborhood outside blow away (during Hurricane Ike).  You can then imagine how thrilled I was to hear that forecasters have predicted an above-average hurricane season (Eighteen tropical storms, nine of which will be hurricanes) for 2013. Eighteen tropical storms. Nine hurricanes. I can’t wait.

But, forget about me.  What does this foreboding forecast mean for fuel managers and their operations?  What havoc could one of these storms wreak on their fuel plans and ultimately, their revenue?

Let’s think back to last fall’s major storm: Hurricane Sandy. If there was an award for unplanned and disruptive events, Sandy would get the Oscar® and lifetime achievement award. Even before Sandy came ashore, fuel demand skyrocketed as New Yorkers rushed to fill up, causing run-outs throughout the area. To compound the situation, highway closures cut off last minute fuel deliveries limiting the availability of supply to the fuel stations in need of replenishment. After the storm, fuel deliveries were still being made, but the lack of electricity at retail stations impacted the ability for fuel to be pumped from the tank to the consumers’ vehicles.  Severe flooding caused contamination of fuel tanks rendering them useless. Even to a Texan where things are big, that storm was a doozy.

But, not all weather-related disruptions are such dramatic events. In some cases, something as simple as a 10-degree drop in temperature can impact an organization’s fuel plans and cause fuel revenue to plummet along with the reading on the thermometer. Take a look at The Pantry. In February and March, during a prolonged cold snap, the usual Pantry patrons opted to stay home and keep warm rather than filling up their gas tanks. As a result, The Pantry’s fuel sales declined 7.9% compared to the previous year. Similarly, Stripes, Susser Holdings’ c-store chain, experienced the same effect.  Sam Susser, president and CEO of Susser Holdings, sited "significantly more cold-weather days than the prior two years” as the direct cause for a decline in Susser’s Q1 revenue.

Dramatic or not, it’s obvious that unplanned events such as weather can disrupt even the best laid replenishment plans and fuel operations.  And thanks to our forecaster friends, one thing is certain for the 2013 hurricane season: there’s a storm a’comin’.  Therefore, having tools in place to help better prepare for these events can alleviate some of the pain that is felt due to run-out and retain situations. (That’s the one good thing about hurricanes; they are forecasted. You know that they are coming well enough in advance so you can do your best to prepare for the impact that they will have on demand as well as your inventory and operations.) But, when putting together your fuel plans, don’t just take into account the big hitters such as Sandy and Ike. Remember to consider the less obvious players as well e.g. cooler weather. Yes, bad weather may only happen a couple times during the year, but it is still a disruption, and for a fuel-based businesses working on thin fuel margins, every penny counts.


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