Fuel Changes Less Scary Than Imagined
JERSEY CITY, N.J. -- Like death and taxes, change is inevitable, and the retail fuel marketplace is no exception.
"One thing retailers can always rely on is change," Mike O'Brien, vice president of market development at Growth Energy, said during Wednesday's Convenience Store News webcast, "Fueling the Future: The Changing Landscape of Fuels and What It Means to Your Business." The webcast was sponsored by Growth Energy.
What's driving changes in the retail fuel marketplace, in part, are regulations and standards. For example, Corporate Average Fuel Economy (CAFE) rules will result in mileage standards jumping from 24.1 miles per gallon in 2012 to 35.5 miles per gallon in 2016 -- a 47-percent increase, O'Brien explained.
CAFE rules are also dictating engine changes. Engines will be downsized from six cylinders to four, he said, and newly designed engines and fuel systems will favor use of more ethanol fuel.
In addition, the Environmental Protection Agency is adjusting fuel standards. In the proposed revisions to its Tier III rule, E10 will become the standard certificate fuel for new cars, according to O'Brien. The switch will be optional by 2017 and mandatory by 2020.
So, will these changes leave the retail fuel industry behind the eight ball? Not necessarily, according to the CSNews webcast presenters.
Some retailers are getting a head start in the alternative fuels race. Notably, more than 70 locations in the United States are selling E15 -- a blend of 15 percent ethanol and 85 percent gasoline -- and they represent a sizable geographic spread, O'Brien stated.
Also adding legitimacy to the often scary field of alternative fuels are big convenience and fuel retailing chains such as Murphy USA, MAPCO Express and the relatively new Minnoco, all of which have already staked their claim in E15.
In a recent study of 38 sites that have been selling E15 for six months or longer, retailers said there is a price advantage to offering the fuel -- on average, a 7-cent-per-gallon advantage. Although retailers did not provide specifics in the survey, they indicated their fuel sales and in-store sales were up, O'Brien said.
During Wednesday's webcast, Lance Klatt, executive director of the Minnesota Service Station & Convenience Store Association (MSSA), explained how its independent operator members are taking their fueling decisions into their own hands with the formation of a new fuel brand, Minnoco (Minnesota Independent Oil Co.).
The association began marketing the brand as a way for its independent dealers to control an exclusive brand that includes many grades of gasoline. By marketing E15 and E30, MSSA's 400 members can attract a new customer base, and offer a higher octane of fuels plus a cheaper alternative, he said.
The association's goal is to have 100 Minnoco locations in five years.
It's not just retailers that are embracing the changing fuel landscape, either. NASCAR is aiming to take the lead with clean energy and has even launched a green initiative. For many years, the NASCAR spec fuel was a leaded aviation fuel (112 octane). The racing giant then adopted unleaded fuel (98 octane) in 2008 and E15 (98 octane) in 2011, according to Andrew Randolph, engine technical director at ECR Engines.
With that change came the concern that water could contaminate the gas tank. However, tests have proved this to be a non-issue. In fact, ethanol-blended fuels are not the bad guys some make them out to be, he said, cautioning people to be careful about what they hear around the "politically charged" topic.
"We've heard the doomsday claims of the impact of ethanol, but the claims don't make sense from a chemical engineering background," Randolph said.
He noted that NASCAR's E15 conversion was seamless and after more than 7 million accrued miles in race conditions, there have been no mechanical issues attributed to E15.
The results are similar to what MSSA's retailers are experiencing. According to Klatt, the association's members have not had any legal issues in connection with their fuel changes.
Click here to access a replay of the webcast.