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Dear PEI Member:

One word dominated fuel handling equipment news during the past two weeks. That word is “ethanol.”

For openers, the American Petroleum Institute (API) and the American Fuel and Petrochemical Manufacturers (AFPM) all but promised litigation if, as expected, the U.S. Environmental Protection Agency (EPA) grants a fuel volatility waiver that will allow the year-round retail sale of E15. In a Feb. 8 letter to acting EPA Administrator Andrew Wheeler, API and AFPM stated the EPA has no legal authority to issue such a waiver. A decision by the EPA to grant a waiver would “invite litigation,” the letter added.

Even as API and AFPM threatened legal challenges, the two major U.S. ethanol advocacy groups hosted their annual conferences — Growth Energy, with its Growth Energy Executive Leadership Conference in Palos Verdes, California, and the Renewable Fuels Association (RFA), with the National Ethanol Conference (NEC) in Orlando, Florida.

Both conferences discussed the state of the worldwide ethanol market, the negative impact of tariffs on ethanol producers and the upcoming reset of the Renewable Fuel Standard. But, for me, most interesting of all was a presentation at the NEC on focus group research recently conducted by public affairs firm The Locust Street Group. (The Washington, D.C.-based firm takes its name from the street in Des Moines, Iowa, where many presidential candidates launch their campaigns.)

The RFA-sponsored research was designed to gauge how the public perceives ethanol, in general, and E15, in particular, so the ethanol industry can better position future branding campaigns. The demographically and politically balanced focus groups included 54 registered voters (and drivers) in St. Louis, Missouri, and Alexandria, Virginia.

Key findings included the following:

• Eighty percent of consumers are not aware that their gasoline contains ethanol.
• Most consumers instinctively believe less ethanol is better for their vehicles. When asked to explain why, one participant said, “Ethanol is alcohol, and alcohol is toxic for my body. Why would I want to put that in my vehicle?”
• Two-thirds of consumers support the summertime ban on E15 because they question the higher blend’s safety and don’t know if their cars can run on it.

Consumer Research on E15

Fewer C-Stores Selling Fuel

Top 15 Petroleum Marketing Trends

E15 Enforcement Discretion

Bills to End EV Subsidies

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by e-mail to the editor, Rick Long at rlong@pei.org

or join the discussion in the  Petroleum Equipment Forum

Those findings would seem to suggest trouble for ethanol, but the focus groups also showed the right messaging can sway consumer opinion. In fact, nearly two-thirds of the participants viewed ethanol more positively by the end of the sessions.

The focus groups tested a variety of consumer messages. Not all resonated. For example:

• Higher ethanol blends give you more choice. Three-fourths of the participants viewed more choice at the pump as a negative, not a positive. Too many options, labels, colors and numbers overwhelm and confuse drivers. Keeping fuel choices simple is more consumer-friendly.
• Ethanol is domestically produced. Although participants were pleased to learn ethanol is a domestic fuel source, few said that would influence their purchasing decisions.

The messages that did work? Pitching ethanol as an environmentally friendly fuel seemed to play well. Even people who don’t consider themselves particularly “green” like to support the environment, especially when doing so doesn’t come at an extra cost.

As for E15, the focus groups responded most positively when the blend was presented as a “higher value” fuel option. The key was E15’s octane rating. Most drivers don’t understand what octane is, but they assume it’s a “good thing.” When The Locust Street Group pointed out that E15 has a higher octane than E10, the consumers were impressed.

Another panel at NEC — this one composed of fuel marketers who are selling E15 — gave additional context to the E15 price-value relationship. The retailers said customers begin to wonder when E15 is priced 5 or 10 cents a gallon below E10. The thinking seems to be: “If this fuel is so good, why is it so cheap? There must be something wrong with it.” The sweet spot for E15 pricing appears to be at or just a penny or two below E10. At that level, consumers think “I’m getting a great value on this because of the higher octane.”

Look for auto mechanics to star in future ethanol industry promotional campaigns. Why? The focus groups revealed that when an auto mechanic says ethanol fuels are good, consumers listen. Unlike fuel marketers, mechanics don’t have a profit interest in selling higher ethanol blends. So, consumers will give more credence to mechanics’ assurances that E15 is safe, reliable and a good value.

FEWER C-STORES SELL FUEL
The 2019 NACS/Nielsen Convenience Industry Store Count shows 153,237 convenience stores operate in the U.S. today. That’s down 1.1 percent from the 2018 record of 154,958 stores. Single-store operations account for 62.3 percent of all convenience stores. Approximately 80 percent of the stores (121,998) sell motor fuel, a 0.5 percent drop from 2018.

The study’s authors attribute the dip in fuel sales to new business models that focus on foodservice and new store formats, including urban, walk-up locations. Convenience stores still sell 80 percent of the motor fuels purchased in the U.S.

OPIS LISTS TOP 15 PETROLEUM MARKETING TRENDS
The Oil Price Information Service (OPIS) announced on Feb. 14 its top 15 trends in petroleum marketing for 2019:

1. Chip card fraud
2. Crime waves hitting C-stores
3. Ransomware attacks on fuel marketers
4. The return of Big Oil to retail
5. Major brands’ declining market share
6. The acceleration of mergers and acquisitions
7. Gasoline losing ground as a traffic builder
8. “Gas-n-go” customers inside stores
9. Truck driver shortages
10. Next-generation loyalty programs
11. Mobile payment apps
12. Car washes
13. Emerging internet threats (Amazon)
14. C-store chains pursuing electric vehicle (EV) charging
15. Biometrics

AGRICULTURE DEPARTMENT GIVES E15 ASSURANCES
U.S. Department of Agriculture Deputy Secretary Stephen Censky encouraged “discretionary enforcement” of the summertime ban on E15 sales if the EPA cannot conclude a rulemaking to allow summertime E15 sales by June 1. Speaking at the National Ethanol Conference, Censky said he hopes the rulemaking can be completed in time. He also said that although any decision to limit enforcement will be up to the EPA, the Department of Agriculture sees discretionary enforcement as a good Plan B.

BILLS TO END EV SUBSIDIES INTRODUCED
Sen. John Barrasso (R-WY), chair of the Senate Environment and Public Works Committee,  introduced legislation Feb. 6 to end federal EV tax credits. Rep. Jason Smith (R-MO) authored a companion bill in the House. The Manhattan Institute estimates the “Fairness for Every Driver Act” would produce $20 billion in savings over the next 10 years. Barrasso and Smith introduced similar legislation in 2018.

BRIEFLY NOTED
“Chevron has big plans for U.S. and Mexican retail fuel business expansions, along with new petrochemical and refining projects. Chevron said that it is on track to hit about 400 Chevron-branded retail sites in Mexico by 2020. Also, it is targeting an additional 75 U.S. ExtraMile C-stores per year, the company said.” — Oil Express Alert, Feb. 6, 2019
“[T]here are more than 7 million open jobs in the United States, and we just simply don’t have enough people to fill them. As the president said just about a week ago, ‘[We] need people coming in because we need people to run the factories and plants and companies.’ While it looks like we’ve averted another shutdown, the root problem still remains. The stars are aligning to get something significant done. And, as always, manufacturers will lead.” — Jay Timmons, INPUT, Feb. 13, 2019
“In Horseheads, N.Y., law enforcement removed a GSM [Global System for Mobile]/cellular powered skimmer from inside a fuel dispenser. The GSM skimmer had been installed like Bluetooth skimmers, but the GSM skimmer can transmit stolen data through text messaging to any number anywhere in the world.” —  www.convenience.org, Feb. 15, 2019

DEATHS
Dave Sousa, 71, died Jan. 29. Sousa was Lincoln Lubrication’s sales representative in Arizona, Nevada and California for more than 40 years. Survivors include his wife Linda and daughter Jen.

MEMBER NEWS
Macnaught Americas retained Bill Parker, on a consulting basis, to assist with sales and marketing strategies and projects.
Petroleum Solutions Inc. (PSI) signed an agreement with Canary Compliance, under which PSI will offer its customers Canary Compliance’s data-driven remote tank monitoring system for underground storage tanks.
Source North America opened a training facility in Arlington, Texas. The center includes a replica of typical U.S. and California fuel site configurations, along with a classroom for training and seminars.
Vapor Systems Technologies, Inc. (VST) announced the following appointments: Scott Bennett, executive vice president; Rachel Curry, vice president of finance; Scott Brown, vice president of sales and marketing. The three also joined the VST board of directors.

MEMBERSHIP APPLICATIONS
Ohio construction company. Simon Surfaces, 70 Karago Ave., Youngstown, OH 44512-5949, applied for service and construction division membership. Rich Serignese is vice president of the company, which was established in 2000. Simon Surfaces specializes in fuel island restoration. Sponsored for PEI membership by Ben Stallings, Fatboy Electric Inc., Kansas City, Missouri.
www.simonsurfaces.com

Belize maintenance company. Petroleum Equipment Services Ltd., 2051 San Martin Road, Belmopan, Cayo District, Belize, has applied for service and construction division membership. Armis Hernandez Jr. is maintenance technician and operation manager for the firm, which was established in 2006. Petroleum Equipment Services Ltd. performs preventative and corrective maintenance, calibration for dispensers, and installations of aboveground and underground tanks and forecourt controllers. Sponsored for PEI membership by David Fiala, FMG-LLC/SFICO, Maitland, Florida.

ADMITTED TO PEI

• Petroleum Equipment Maintenance LLC, Westminster, Colorado (service & construction)
• Protec Petroleum, West Kelowna, British Columbia, Canada (service & construction)
• Profuel Engineering Services, Darul Ehsan, Malaysia (service & construction)
• Altol Environmental Services, Ponce, Puerto Rico (affiliate)

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Petroleum Equipment Institute
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The TulsaLetter (ISSN 0193-9467) is published two or three times each month by the Petroleum Equipment Institute. Richard C. Long, Editor. Opinions expressed are the opinions of the Editor. Basic circulation confined to PEI members.