March 12, 2015 | Vol. 65, No. 5
March 12, 2015 | Vol. 65, No. 5
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Dear PEI Member: We had a great opportunity to talk with more than 160 members and their customers from February 16 to March 5 at two PEI committee meetings and the annual conventions of the Western Petroleum Marketers Association (WPMA), the Petroleum and Convenience Store Exposition of Mid-America (PACE), the Georgia Tank and Environmental Contractors Association (GTEC), and the Southeast Petro-Food Marketing Exposition (SE Petro). Based on what they told us, here’s our take on the prospects for the rest of 2015. Overall, the year is shaping up to be a smidgen better than 2014 across all membership divisions. Construction of new retail fueling stations is steady across the larger convenience store chains. The same holds true for building new commercial and governmental fueling sites. Emergency generator business continues to be strong and profitable. Expect continued merger and acquisition activity among PEI members. Owners of profitable PEI companies are finding willing buyers, although it takes patience to put the deals together. We expect to lose about 2 percent of our domestic PEI distributors in 2015 due to acquisitions and mergers. Customers of all sizes will continue to merge as the strong grow stronger and smaller companies try to keep up. Despite the wheeling and dealing by marketers in recent years, the U.S. convenience store industry is still in the consolidation phase. Improved motor fuel margins help. So does the availability of relatively cheap money. Interest in CNG refueling facilities has leveled off as a result of lower gasoline prices. It hasn’t gone away, but it isn’t generating the same buzz as it did in the last few years. |
Why Are We Waiting For the RFS DFW Airport Study on ULSD Issue
by e-mail to the editor, Robert Renkes at rrenkes@pei.org or join the discussion in the Petroleum Equipment Forum to unsubscribe or change preferences see below.
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The hiring, training and retention of service technicians is a top issue among distributor and service companies. Members have talked about it for so many years now that the problems seem chronic. Everyone handles issues involving service techs a little differently, but all seem to struggle with the problem at some time or another every year. Distributors are NOT counting on E15 equipment sales and upgrade projects to boost their numbers in 2015. Confusion about what the RFS requirements will be—and when they will be released—has the alternative fuel industry biding time until something more definitive comes out of Washington. More from our conversations:
WHY IS EPA PARALYZED ON THE RFS? Congress responded to the demand uptick by updating the Renewable Fuel Standard (RFS), requiring refiners to add increasing amounts of ethanol and other biofuels to motor fuels through 2022. In the lawmakers’ view, something had to be done to reduce U.S. dependence on foreign oil. Then the Great Recession hit. Gasoline demand declined, imports began to drop precipitously, and advanced drilling technologies encouraged the U.S. to produce more of its own oil. Despite the decline in oil imports, the RFS requires the Environmental Protection Agency (EPA) to find ways to add ever-growing volumes of biofuels to the nation’s motor fuels. In 2013, however, refiners hit the “blend wall”—the point at which all gallons of gasoline can be blended with 10 percent ethanol. In order to avoid Congressional action, on November 15, 2013, EPA proposed a relaxation of the 2014 RFS mandate. Corn ethanol’s portion would be only 13 billion gallons instead of the previously prescribed 14.4 billion gallons. In response to EPA’s proposal, pro-ethanol groups demanded an increase in ethanol, while petroleum refiners and many petroleum marketing groups warned of the equipment costs and hazards associated with adding more ethanol to gasoline. Unable to make a decision, EPA punted. On November 21, 2014, EPA said that the 2014, 2015 and 2016 ethanol requirements would be revealed in 2015. We have been talking with PEI members and their customers about the RFS since 2007. We understand the volumes, the published deadlines, the blend wall and the equipment issues involved when fuels like E15, E25 and E85 are introduced into the marketplace. So do most PEI members. But when we are asked about why EPA delayed its decision, we are at a loss to come up with a plausible explanation. The editors at Lundberg Letter investigated this issue and met it head on in the publication’s February 13, 2014, issue. The answers provided by the Lundberg editors are the most comprehensive we have seen and are worth sharing with TulsaLetter readers. “Why, with the power to reduce, leave the same, or increase the RFS, has the EPA been repeatedly delaying its decision? In the [Lundberg] Letter’s interviews of industry people, and review of press articles, several theories emerged. “The most reasonable rationale behind EPA’s irrational-looking frozen stance would be to set the RFS volume at the blend wall. That would mean it has to wait for the prior year’s final demand data to emerge. It’s ridiculous, but is the most reasonable excuse for EPA’s delay. Choosing RFS volume to match the blend-wall would remove any need to force more ethanol into the gasoline pool by way of higher percentage blends. The need for E15, E85, etc., would be chocked off. Ethanol use would only grow, or shrink, with gasoline demand. “If it is not to set volume at the blend-wall, is it incompetence? No, not in this case, observers opine. It is likely a calculated move by EPA and the Obama Administration. “What politics could be behind this unending delay to name the sales quota? There is speculation that not releasing the RFS allows the White House, in control of EPA, to bargain with Congress, both sides of the renewable fuels debate, and dangle the RFS in front of them to gain concessions. The RFS is a bargaining chip that goes away once the volume is mandated. For now, having EPA delay determining its sales mandate lets the Administration thumb its nose at Congress and torture the oil industry with uncertainty at the same time. “Is part of EPA’s paralysis caused by anti-petroleum sentiment? It’s part of the mix. Sticking it to Big Oil is a favorite pastime as evidenced by Keystone. Delaying the RFS again and again forces the oil industry to get on their knees and beg to be told how much ethanol they are forced to buy and sell. The delay is an added punishment retroactively, which is even more fun for the anti-oil crowd than plain punishment in current time. “Since Big Ethanol is also champing for a decision, does this mean EPA is dissing the ethanol industry? The ethanol industry and its political benefactors got hit hard by the blow up in RIN prices. That was terrible PR for them. The public knew about it and became restive. EPA knows that if it issues any renewable fuels sales standard above the blend-wall, another round of PR damage to ethanol advocates and the EPA would emerge.” NEW STUDY ON ULTRA LOW SULFUR DIESEL The authors of the DFW study made it clear that they “were not compelled by regulatory compliance to address this issue, but an aggressive approach is necessary to curtail contamination and halt excessive corrosion of components of the system.” Program recommendations include shocking a contaminated system with biocide; removing the tank and cleaning it thoroughly, including the walls and ceilings; filtering the product as it is put back into the system; and treating the fuel with a maintenance dose of biocide to dispatch residual microorganisms and prevent future propagation. Monthly recommendations include sampling the tank bottoms and cleaning the tank for water removal if the bottom sample is cloudy or has visible water in it. An annual tank cleaning is also recommended. INDUSTRY NOTES MEMBERSHIP APPLICATIONS ADMITTED TO PEI
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© 2015 The TulsaLetter (ISSN 0193-9467) is published two or three times each month by the Petroleum Equipment Institute. Robert N. Renkes, Executive Vice President, Editor. Opinions expressed are the opinions of the Editor. Basic circulation confined to PEI members. |
