Understanding

Retail MarketsThe Final, Complex Link in the

Fuel Chain

The Fuel Price Influence Chain

The Final Mile in the Supply Chain

• There are four main points in the final mile of the fuel chain:

– Retail Stations (branded or unbranded)

– Truckstops

– Cardlocks

– Mobile Fueling

Retail – The Final Link in the Supply Chain

• We’ve discussed futures markets, spot markets, rack markets, and now

it’s time to focus on the final link in the supply chain – retail markets.

• Retail markets are perhaps the most complex piece of the fuel

marketing picture.

• There are about 150,000 branded and unbranded fueling stations

throughout the continental U.S. About 121,000 have C-stores.

• Retail outlets are supplied by a variety of means, including through

major brand refiners, suppliers and jobbers.

• The retail landscape has changed dramatically in the last several

years.

Retail – The Ever-Changing Landscape

• Less than 20 years ago, most U.S. gasoline stations were branded to a

major flag – Exxon, Mobil, Chevron, Texaco, etc.

• Since then, majors have consolidated:

–BP purchased Arco, and Amoco.

–Shell today comprises Shell and formerly Motiva (now Saudi Aramco).

–ChevronTexaco today comprises Chevron and Texaco.

–Marathon today comprises Marathon, Ashland, Western Refining and

Tesoro/Andeavor.

–Valero today comprises what was known as part of Tosco, Ultramar

and Diamond Shamrock.

–ConocoPhillips today comprises Conoco, Phillips, Tosco, and Unocal

76.

Retail – The Ever-Changing Landscape

• The consolidation of those individual companies into “Super Oil

Companies” has meant that a huge portion of retail stations owned by

those companies were sold off.

• Major refiners, having consolidated, in the mid 2000’s started selling

off most of their retail network to chain operators, jobbers and dealers.

• That means that more and more retail outlets are now run by single site

operators (Dealers), many branded and some unbranded.

• That has also created a niche for “hypermarketers” such as Costco,

WalMart, Sam’s Club, Safeway, and BJ’s Wholesale to emerge as a

competitive force.

The Retail Environment Today

• The concept of the Brand has changed – the value of the oil company

credit card has diminished in many markets. Customers no longer are

loyal to a major brand credit card with Visa, AMEX and debit cards being

more widely used.

• Hyper-marketers (like Costco and Sam’s Club) are becoming more and

more prevalent. Hyper-marketers undercut their retail gasoline

competition – they give away gasoline to get the customer into the store.

• Supplying retail outlets has become more complicated and costly,

because of the changing U.S. fuel slate and tougher regulations.

Most big oil companies sold off sites to their distributors, dealers and private operators, with Chevron being one of the only

ones to hold onto a core of sites. “New era” operators—large, regional and privately owned—stepped in to lead on c-store

retail.

But a decade later, the fundamentals have shifted back again in U.S. retail’s favor. The reason: Flattening demand for

gasoline in the United States and record-setting production runs in 2018 by refiners have created a domestic supply glut. For

these refiners, Big Oil companies among them, finding a home for the fuel is becoming increasingly attractive.

“A lot of refiners, if you give them a truth serum … you’d find are envious of the Marathon model,” says Tom Kloza, global

head of energy analysis for Oil Price Information Service (OPIS), Gaithersburg, Md. He is alluding to Marathon Petroleum

Corp.’s ownership of the Speedway c-store chain, which, with 2,900 stores, will have pushed through an estimated 7.8 billion

gallons of gasoline in 2018.

This number will grow as Marathon begins to rebrand the company-owned and -operated sites it gained in 2018 from its

acquisition of Andeavor to the Speedway brand. The retail ops also survived a 2016 challenge by an activist investor who

encouraged Marathon to spin off Speedway.

“When you have a lot of retail that you can move domestic production of gasoline through, that’s a good thing,”

Kloza says. It’s better to sell [gasoline] through retail, where the price can be more tightly controlled, than on the spot market,

where refiners may be forced to sell at a big discount.

“Now what major oil misses is the guaranteed and ratable offtake from a convenience chain,” Joe Petrowski says, adding that

“the hunt is on” for large chains with large fuel volumes.

This is not to say that Big Oil is making a mass migration back to retail; most of them have given no sign they are interested

in a return. And not every downstream endeavor will involve company-owned and -operated stores. But even the limited retail

maneuvers of a couple of oil giants is enough to cause tremors in the landscape and M&A dynamics of the c-store industry.

And as the Shell and BP examples show, there is more than one way to do retail.

But Wait! From CSP News 3/18/19:

“Big Oil Makes a Major Retail Statement”

2019-10-31 08:54:22 EDT

***Marathon to Spin Off Speedway, Review Midstream; Heminger to Retire in 2020

Marathon Petroleum Corp. (Marathon or MPC) plans to separate its retail arm into an independent, publicly traded company, with an expected

2019 EBITDA for Speedway of about $1.5 billion.

The move was one of several announced Thursday by the Findlay, Ohio-based company following recent challenges by activist hedge fund Elliott

Management and other large institutional shareholders.

Marathon also said it was evaluating its midstream business for ways to drive shareholder value and announced two retirements. Chairman and

CEO Gary Heminger said he planned to retire in 2020 after the annual shareholders' meeting.

Executive Vice Chairman Gregory Goff has elected to retire effective Dec. 31, 2019.

Independent Speedway will consist of Marathon's company-owned retail store operations, while the corporation retains its direct-dealer business,

with an expected 2019 EBITDA of about $400 million, which is included in the retail segment as currently reported.

"Speedway has delivered leading same-store merchandise growth, fuel margins, and profitability -- and has significant opportunities for further

growth,“ Heminger said in a statement.

With a potential enterprise value of $15 billion to $18 billion for standalone Speedway, we believe this transaction will unlock significant value for

MPC shareholders and form the basis of a compelling value proposition for future Speedway investors."

A special committee of the board will be formed to enhance Marathon's strategic review of its midstream segment. It will analyze the strategic fit of

assets with MPC, the ability to realize full valuation credit for midstream earnings and cash flow, and separation costs, among other factors.

Marathon offered no assurance regarding the timing or completion of the Speedway spinoff. The move is dependent on factors such as the

macroeconomic environment and credit and equity markets, the statement said. Separation of Speedway won't require a shareholder vote but will

be subject to final approval by the MPC board and other customary conditions.

Regarding the changes in leadership, Marathon has appointed a committee to consider internal and external candidates to succeed Gary

Heminger. Michael Hennigan, current president of MPLX GP has been appointed CEO of that organization effective Friday.

--Beth Heinsohn, bheinsohn@opisnet.com

More News - Marathon to Divest Speedway

From CSP News 3/18/19

2021-10-26 04:32:23 EDT

Shell Buys Out Joint Venture With Texas Fuel Retailer

Just three months after BP bought out its joint venture with retailer Thorntons and ArcLight Capital Partners LLC, Shell Retail and

Convenience Operations LLC, a wholly owned subsidiary of Shell Oil Products US, announced today that it signed an agreement to acquire

the remaining 50% share in Texas Petroleum Group LLC, a 50/50 JV between Shell Oil Products US and Texas fuel retailer

LandmarkIndustries Holdings LTD.

The transaction involves 248 company-owned convenience stores from its JV operation with Landmark Group of Cos., which operates stores under the

Timewise brand in Texas, as well as fuel supply agreements with 117 independently operated retail sites, according to the announcement.

TPG has 170 company-owned fuel and convenience sites and supply agreements for 63 independent sites. Shell is also picking up Landmark's retail

gas station network of 78 company-owned sites and supply agreements for 54 independent dealers.

Shell said the transaction advances its Powering Progress strategy by growing its retail footprint in a core market; offering alternative

energy such as electric vehicle charging, hydrogen, biofuels and lower-carbon premium fuels; and growing non-fuel sales through

convenience stores.

When the deal closes, TPG will be a wholly owned subsidiary of Shell Retail and Convenience Operations within its Downstream Mobility

business.

The transaction, which is expected to close by the end of the year, is subject to regulatory clearance and certain closing conditions.

In its announcement, Shell said it "remains committed to collaborating with wholesalers and dealers to serve customers, drive business value, and

thrive through the energy transition." Shell said it will continue to support wholesalers, dealers and JV partners, who own and operate more than

13,000 U.S.

Shell sites.

The company expects to serve 40 million customers per day worldwide at retail stations, with a total of 55,000 Shell sites and 15,000 convenience

stores by 2025.

--Reporting by Donna Harris, dharris@opisnet.com; Editing by Michael Kelly,

News - Shell Buys Out Joint Venture With Texas Fuel Retailer

From CSP News 3/18/19

2021-08-31 02:23:58 EDT

***BP Closes on US Retailer Thorntons

BP said in an announcement Tuesday that it has assumed full ownership of Thorntons,

reentering the retail fuel business with company-owned and -operated stores.

As previously reported, BP said in July that it would buy out private equity group ArcLight Capital

Partners LLC's stake in the chain. The major said the deal expands its already growing global

convenience store business by more than

200 stores in Kentucky, Illinois, Indiana, Ohio, Tennessee and Florida.

With the transaction, BP also will add the Thorntons brand to its portfolio.

The major said in its announcement that Thorntons has a "competitive consumer offer and strong

business operations" and it intends to "build on the Thorntons brand."

The BP brand ranks No. 9 nationally in market share by store brand at 3.0%, while Thorntons ranks

No. 63 in the U.S. at 0.17%, according to OPIS MarketSharePro. In the Southeast, BP ranks No. 10

in market share by store brand at 3.64%, and Thorntons ranks No. 38 at 0.30%.

--Reporting by Donna Harris; Editing by Barbara Chuck, bchuck@opisnet.com

News - BP Closes on US Retailer Thorntons

From CSP News 3/18/19

2021-08-20 02:56:38 EDT

***US Retailer ExtraMile Pushes East in Growth Initiative

Just weeks ago, groundbreaking ceremonies took place for one of the first ExtraMile stores in Chevron's Eastern Division -- almost two years after

officials for the convenience store franchise told OPIS it was contemplating a move East.

ExtraMile Convenience Stores LLC, the franchise joint venture launched by Chevron with branded distributor Jacksons Food Stores, has begun adding franchisees

east of the Mississippi as part of an aggressive expansion initiative that began in 2017. The first couple of sites are in Alabama and Mississippi, officials told some

attendees of the Chevron and Texaco Petroleum Marketers Association conference Aug. 9-11 in Colorado Springs, Colorado.

Four years ago, when ExtraMile was a chain of about 700 stores, Chevron and Jacksons announced plans to double the network by 2027. Based on a brochure

circulated at the Colorado conference, there are now 955 ExtraMile stores --

785 in California, 67 in Washington state, 41 in Oregon, 33 in Idaho, 18 in Utah, and 11 in Nevada.

The literature suggests new stores are likely to be a cut above the small markets typical of conventional branded gas stations, with more of an emphasis on food

service.

A Tuscaloosa News article in July said Midstates Petroleum Co. of Vernon, Alabama, was building a $2.6 million ExtraMile c-store and food court in Alberta, Alabama.

The 6,000-square-foot facility will offer basic convenience items as well as a frozen yogurt shop, barbecue plate lunches, fried chicken, and Hunt Brothers Pizza. The

site also will house the first Dunkin' Donuts shop in Alberta, the Tuscaloosa News reported.

Chevron officials declined to discuss current expansion plans. In September 2019, the major told OPIS that at that time the network reached 880, about 300 of them

Chevron company-operated stores, 25 Jacksons company-ops, and the rest franchisees. ExtraMile also was slowly rolling out a new image program for its stores.

The brochure used to promote the franchise has changed slightly from the literature circulated three years ago, but the incentives are substantially the same. Under

Program A, stores with average monthly sales of $100,000 or more over a 12-month period can receive conversion incentives of 1.5 times average monthly sales up

to $300,000 for the cost of work. The $300,000 ceiling was added to the current brochure. Under Program B, stores with less than $100,000 in average monthly sales

can receive up to $150,000 for cost of work.

ExtraMile offers a three-year contract with a 90-day termination option (de-branding fees and costs apply). The prior franchise brochure said there were "no

termination fees after the store opens." Like the earlier brochure, the $15,000 initial franchise fee will be waived. The royalty is 4.5% of gross sales (up from 4% in the

earlier literature) capped at $100,000 and is subject to payment of a minimum royalty fee spelled out in the Franchise Disclosure Document. The marketing fee is

1.5% of gross sales (down from 2% in the earlier literature) capped at $100,000. ExtraMile franchisees must have a current Chevron or Texaco brand fuel supply

contract or marketer brand authorization agreement.The list of required products and services went from 12 three years ago to 14 today. Based on the list, there's a

focus on private-label products and food service. ExtraMile stores now must stock the ExtraMile ExtraGood products, as well as branded Mile One Coffee and hot

beverage program. There's a newly required minimum five-door cooler, and interior public restrooms and storefront parking also are now mandatory.

News - US Retailer ExtraMile Pushes East in Growth Initiative

From CSP News 3/18/19

2021-10-18 11:50:23 EDT***ExxonMobil Embraces NACS Show to Emphasize Branded Offering

NACS has had ex-presidents, prime ministers, Sports Hall of Fame members and cabinet officials participate in its annual trade show, but this year it featured a new wrinkle. For the first time ever, ExxonMobil had a major booth offering, looking to reinforce the fuel differentiation and frictionless payment options that they've developed in the last five or so years.Although the major oil company has a substantial unbranded presence in the U.S., the NACS effort was all about emphasizing its brand power and innovative payment methods that include Google Pay, Apple Pay, Amazon (Alexa) and others.Also touted was the Synergy Supreme offering which has been adopted as the premium gasoline offering for 10,000 sites across the U.S.Through hundreds of branded wholesalers, ExxonMobil now has about 12,000 sites in all. And unlike fellow supermajor BP, the

company has not considered purchasing retail chains to find a home for transportation fuels it produces."The branded wholesale model is working well for us," stressed Yan Cote, the consumer offer manager for ExxonMobil. He didn't

rule out prospective joint ventures down the road in the "active space" of downstream marketing.OPIS notes that ExxonMobil has turned to BFAs, or Branded Fee Agents, in some markets where it doesn't directly supply terminals.

That model is particularly popular in the Northeast, through large jobbers who can procure fuel on the spot market and follow strict branded standards for payment, image and additization.Unlike some other majors, ExxonMobil will soon have more fuel to sell. An ambitious project to add 250,000 b/d of processing

capability to its Beaumont, Texas, refinery will yield more gasoline, diesel and jet fuel. Some of that fuel may head to Mexico, where there are more than 500 Mobil branded sites.Most recently, ExxonMobil was the largest importer in Mexico, bringing in70,700 b/d of fuel in August, inching out second-place Valero.Last year, Oil Express wrote about ExxonMobil's efforts to court truckstop operators with its differentiated diesel fuel offering -- Synergy

Diesel Efficient -- and Cote said that they now have several hundred truckstops offering the proprietary fuel. The company remains bullish on diesel and boasts a fuel that promises 2% better mileage along with other detergent qualities that appeal to fleets.An active effort to sign additional fleets remains ongoing, and it's possible that the diesel may eventually garner a Top Tier Diesel

designation. ExxonMobil acknowledges that gasoline demand may decline by double digits this decade but predicts 6% growth in diesel thanks mostly to the commercial segment.

--Reporting by Tom Kloza, tkloza@opisnet.com; Editing by Beth Heinsohn@opisnet.com

News - ExxonMobil Embraces NACS Show to Emphasize Branded Offering

From CSP News 3/18/19

From CSP News 3/18/19

2019-11-06 11:51:26 EST

*Phillips 66 and a large wholesale/retail operator, unnamed for now, have agreed to a 50-50 joint venture marketing deal for the U.S.

West Coast, the energy company announced at its Investor Day event on Wednesday.

Working to secure greater placement of refined product from Phillips 66 refineries, the company is focusing on its wholesale business

and intends to pursue more such partnerships, along with further expanding exports of fuel, said Brian Mandell, executive vice president,

marketing and commercial. Under the deal, Phillips will participate in retail fuel margins and store sales.

The executive described the West Coast as a tough market where refiners have to export product if they lack retail-integrated

sales. Phillips 66 wants to remain a wholesale branded marketer and will "fill in“ with wholesale-retail partnerships to provide

long-term offtake for the company's refineries, Mandell said.

He noted that the announced deal is not the first such partnership for the company. In 2014 Phillips used a similar joint venture in

Oklahoma City as an opportunity to better integrate its wholesale business with retail, relying on its Ponca City refinery for supply. It

started small but has built market share since then, he said.

Phillips 66 is planning $250 million to $325 million in capital investment in the new venture and puts expectations for annual incremental

adjusted EBITDA at $50 million to $60 million.

The deal is expected to close by the end of the year, Mandell said.

The West Coast currently represents 13% of overall demand for Phillips 66 fuel, according to one presentation slide, with a total site

count of 680 and total volume of 74,000 b/d. Site concentration is greatest in southern California, followed by Washington state.

--Beth Heinsohn, bheinsohn@opisnet.com

News - Phillips 66 Inks USWC Marketing Deal with

Wholesale/Retail Operator

NACS/Nielsen Convenience Industry Store Count - 2021

US Retail Today

NACS State of the Industry 2020

• April 2020 demand was down 38.4% from 2019 due to covid

• 2020 total demand was down 26.5% over 2019

• Gross pool fuel margins averaged $.3469/gal in 2020, up 44.8%

• Net margin of $.2898/gal net of credit card fees (avg $.0571/gal)

• Average gallons sold per site in 2020 was 161,807 down 12.4%

from 2019

• Convenience stores saw an increase in non-fuel sales of 1.5% in

2020

• Over 51% of all transactions are paid with a credit card or debit

card.

• The average C-Store building is under 5,000 SF

• Many stores are open seven days a week, 24 hours a day (24/7)

• The average C-Store stocks about 500 inventory items.

• C-Store sales are now a large part of the fuel station’s total profit

margin.

US Retail Market Share

Non-Fuel Sector Is Relatively ‘Future-Proof’

• The primary solution to declining fuel

demand is an increased emphasis on non-

fuel offerings.

• Non-fuel offering has effectively replaced

brand (and even price) as the principal

competitive differentiator in fuel retail.

> Non-fuel offering can drive fuel earnings

just as readily as fuel sales can drive inside

sales.

• Moreover, non-fuel purchases need not be

tied to a ‘fueling’ visit.

> In effect, this means transforming a retail

station into a purposeful destination that is

independent of fueling/charging.

• Success requires significant expense and/or

local market expertise.

7

8

9

10

0

50

100

150

200

250

300

20002002200420062008201020122014201620182020

gaso

lin

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em

an

d (

mm

b/d

)

C-store sales Gasoline demand

Total industry gasoline and c-store sales (US)

Source: NACS and EIA © 2020 IHS Markit

c-s

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sale

s (

US

$ b

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An Example of a Successful Chain Fuel Retailer

Buc-ee’s Promotes They Have The

Cleanest Restrooms in America!

Chevron And Jackson Oil Form Joint Venture To

Grow ExtraMile Stores

Five Different Classes of Retail Trade

• Company Operated – called “Company Op.”

• Lessee Dealer

• Jobber/Dealer

• Open Dealer

• Chain Retailer

• The Company Operated station is owned and operated by a major refiner such as Chevron,

Shell, ExxonMobil, BP, and Conoco Phillips. Currently, the largest block of major-owned

stations are Chevron in California.

• With Marathon buying Andeavor (Tesoro), they are the largest refiner in the US and owned

over 2,900 retail sites under various brands including Speedway, ARCO, USA Gasoline and

others. Marathon rebranded many Andeavor retail sites to Speedway prior to their sale -

Marathon completed the sale of their Speedway sites to 7-Eleven Inc in 2021.

• The company owns the land, the pumps, and any above-ground structures (including car

washes, c-stores) associated with the store. The company hires the staff to run the retail

site.

• The company supplies the station directly via its own delivery network.

• The prices that the station charges are set exclusively by the company. The company has

either produced the fuel itself or has bought spot fuel to supplement its own output.

• The retail business model lost favor with refiners over the years. But the value of retail, the

good fuel margins and the guaranteed demand has forced many refiners to take a new look

at the model as we are seeing.

The Company Operated Station

• Never buy “unbranded” product and try to sell it as “branded.”

Majors are very strict about their trademarks, and a violation of this

kind will result in legal action.

• Major oil companies can and do periodically test the fuel at branded sites.

When the product is loaded at the terminal, their additive package is

injected, thus rendering it “branded” fuel. They also include a “tracer” in

the additive package that allows them to test the fuel at the site.

VERY IMPORTANT!

More About Branded Fuel

• If you operate a BRANDED gasoline station, but are supplied by a

jobber, that jobber MUST load the fuel at the major’s rack.

• Federal law requires that when fuel is delivered to a site, the carrier

must provide a Product Transfer Document (PTD). The document shall

include:

1. The names and addresses of the transferee and transferor

2. The date of the transfer

3. The volume of product transferred

4. The identity of the product being transferred

The product bill of lading and delivery tag usually will cover the required

information and must be left at the site as proof of delivery.

Putting Branded Fuel In An Unbranded Site

• If your supplier is not leaving the proper paperwork when delivering to

your site, demand that you get the bill of lading for each delivery. This

will ensure you are getting the right product. By law, a copy of the PDT

must kept for five years.

• Can I put BRANDED gasoline into an UNBRANDED station?

–Yes, but be careful!

>Some supply contracts may have hidden language that penalize putting

branded fuel into an unbranded site.

The Lessee Dealer

• The Lessee Dealer does not actually own the real estate, or the

equipment. They lease or rent the space from the major and absorb the

costs of operating the station.

• Lessee Dealers often receive benefits from the major in the form of

rebates and incentives, especially in markets that feature tight margins,

and stiff competition.

• The lessee dealer typically buys fuel directly from the major who owns

the station. That major charges rack + transportation to deliver into the

station. That is called a “Dealer Tankwagon,” or DTW price that is site

specific.

The Jobber/Dealer

• The jobber/dealer is perhaps the more “entrepreneurial” of the classes of

trade.

• The jobber buys rack – either on a branded, or an unbranded basis – and

may also purchase fuel on the spot market.

• The jobber owns a variety of stations, and they may be a combination of

both branded and unbranded sites, many of which may carry their own

brand (i.e. “Scott’s Gas”) and are considered an unbranded outlet.

The Jobber/Dealer

• Or, they may have purchased the real estate, and the station outright from

the major and have signed an agreement to fly the major’s flag for a

specific period of time.

• Large jobbers are among the most sophisticated of fuel buyers, and are in

essence, mini oil companies with supply, trading and marketing arms.

They are frequently called “Super Jobbers.”

• Jobber/dealers buy their fuel based on rack indexes, and also buy fuel on

a spot market level as well.

• Some jobbers are now offering “licensing” agreements for certain brands

such as Sinclair. The dealer pays a licensing fee for the brand and

benefits and can buy any fuel that contains the Top Tier additive for the

site.

The “Open” Dealer

• The “open” dealer is someone who typically owns just retail outlets – they

are not a jobber. They do not have a supply agreement to pull product at a

rack location.

• The stations they own may be branded or unbranded outlets.

• The open dealer owns everything – the land, the pumps and any inside-

retail outlet. According to NACS in 2020, 61.4% of the C-stores with fuel in

the US are owned by single site operators.

• The open dealer usually buys his fuel from a jobber, who charges him a

“delivered” price to get it from the rack to the station.

• Open dealers are also entrepreneurial, but sometimes may be less aware

of the fuel chain process.

Chain Retailers

• Chain retailers have become among the newest, and most influentialplayers in the U.S. retail landscape.

• Chain retailers are companies such as Kroger, Walmart, Sam’s Club,Costco, and Safeway.

• They often feature the most competitive prices in the market.

• They use gasoline as a “loss leader” to get the customer into the store.

• Chain retailers construct the stations on their own sites thus, they ownthe entire station.

• Chain retailers buy an enormous among of fuel, usually on a rack basis,but also on a spot basis as well.

How Is Retail Priced?

• Remember our Fuel Chain – retail is the last piece, but it too is impacted

by movement in the NYMEX, the Spot Markets, and the Rack Markets.

• However, because competition is so fierce, and because it takes so long

to get fuel from the rack to the station, the lag time that it takes retail

markets to react is much longer.

• The most common way that retail is priced is by taking the rack price as a

basis, adding all the applicable federal/state/local taxes, adding freight

charges, and a mark-up. That final number is a laid-in retail cost.

• That is typically the price that the station owner charges if the market will

let them.

Who Sets the Retail Price?

• If it is a company operated station, the company sets the price.

• If it is a lessee dealer, the lessee dealer sets the price, after buying at a

DTW price.

• If the station is owned by the jobber/dealer, the jobber dealer sets the

price after buying rack or spot barrels.

• If the station is owned by an open dealer, the open dealer sets the price

after buying DTW, or rack-plus.

• If the station is owned by the chain retailer, the chain retailer sets the

price after buying spot, or rack-minus.

• NOTE: Connecticut and Maryland have laws prohibiting petroleum

refiners from directly operating retail locations. The laws are called “retail

divorcement.”

What is DTW?

• DTW or the Dealer Tank Wagon price is the price the major oil company

charges for fuel delivered to a particular site. The price includes freight and

may be adjusted up or down depending on the street competition around

the station. This can be for a company owned site or dealer owned or

leased site.

• DTW pricing is used in “direct serve” market areas defined by the major oil

company. (Direct serve means the major sets the price and arranges to

have the fuel delivered directly to the site).

• Another type of direct station pricing is called zone pricing or street back

pricing. Arco and Valero use this pricing strategy to keep stations

competitive in their market “zone”.

• Since DTW or zone prices are site specific, they are not posted in the OPIS

daily racks.

Other Ways Retail Fuel is Sold – Truckstops

• Truckstops are large facilities that dispense fuel to large on road trucks.

• Truckstops are often travel plazas that feature amenities such as

restaurants, motels, and entertainment as a way to entice truckers to stop

at their location.

• Major truckstop chains include Pilot/Flying J, Love’s, Travel Centers of

America.

• Truckstops also sell retail gasoline and diesel, usually on the front

islands.

Other Ways Retail Fuel is Sold – Truck Stops

• Truck stops supply their own retail fueling stations – either via rack or spot

markets. Most are shippers of record and have leased terminal space in

several markets.

• Truck stops typically pay a discount of some type at the rack, because

they buy so much fuel annually.

• Truck stops offer fleet cards programs to entice fleets to fuel at their

locations by offering incentives such as cost-plus, or retail-minus deals.

• Truck stops are usually able to maintain solid retail margins because they

don’t compete against hyper-marketers, and also because their

restaurants and amenities are such huge profit centers.

• There are only about 7,000 truck stops across the country. They often

compete against each other if they are located on busy Interstate HWYs.

Other Ways Retail Fuel is Sold – Cardlocks

• Cardlocks, also known as commercial fueling sites, are locations where

fuel can be dispensed without any actual employees being on site.

• Cardlocks are usually located in or near industrial parks, making it

convenient for commercial customers who reside near these industrial

areas.

• Consequently, cardlocks are often referred to as “unattended fueling”

sites.

• Many large jobbers operate their own cardlocks, and there are also fleet

card companies such as Pacific Pride, CFN and Comdata, all owned by

FleetCor. Other fuel card networks include Fuelman and Voyager. Most

jobbers need to be aligned with one or more fuel card networks to ensure

they get the network fleet business traffic using their sites.

• When a customer fuels at a cardlock, he is usually buying on a pre-

determined cost-plus formula (with a rack price usually the “cost” piece of

that formula).

Other Ways Retail Fuel is Sold – Cardlocks

• Fuel purchased at cardlocks are sold through fuel cards. These cards

can be proprietary or open.

• A proprietary card would be a fuel card that could only be used at that

cardlock or chain of cardlocks and is not linked to a card network.

• An open card would more often be like a Comdata, WEX, Voyager,

Fuelman, FleetCor and sometimes a VISA or AMEX.

• Cardlocks are generally not available to the general public.

Other Ways Diesel is Sold –

Mobile Refueling / Truck-to-Truck

• Mobile Refueling is also referred to as “wet hosing.”

• Mobile Refueling is when a vendor brings the fuel TO YOUR SITE, and

fuels your trucks on location, usually in the evening.

• The advantage to Mobile Refueling is that it eliminates the end-users

risk of having to select from different suppliers and take on the liability of

tank storage.

• Mobile Refueling also eliminates the time that drivers have to spend

fueling trucks.

• Typically, diesel fuel and some gas sold this way is done on a cost plus

basis. The cost is a rack basis PLUS the cost of transporting the fuel to

the site (in some cases, as much as 40cts/gal) PLUS taxes.

Mobile Refueling – BEWARE!

• Liability – drivers who fuel at night into vehicle fuel tanks usually use a 2-

inch pistol grip nozzle, which has a higher incidence for spills. You need

to make sure your company’s insurance covers this kind of delivery.

• Driver’s Time – customers love to commit to large volumes to get a better

price, but many actually wind up taking less. You need to make sure your

price structure will cover the time it takes to make deliveries. Some

jobbers charge driver time by the minute.

• For example, at $1.50/minute that translates into $90/hour or $45/30

minutes. Many jobbers will build this cost in over the negotiated fuel price.

Is the Posted Price On The Sign The Only Price?

• No!

• Rebates from fuel card providers for using their card.

• Cost-Plus

• Retail-Minus

• Cost-Plus/Retail-Minus – The Better

Other Ways Retail Fuel is Sold – Cost-Plus

•Many large end-users, such as trucking fleets, use cost-plus. The

deal is usually negotiated directly with the oil company, or with a

truckstop chain.

•Most of the retail diesel fuel sold in the U.S. is done on a cost-plus

basis.

•Their purchase price is based on a “cost”, which is usually a rack

price.

•The “plus” is a negotiated rate that is added on to the basic “cost.”

•That final number is called a “cost-plus,” and is usually ultimately

cheaper than the posted pump price (after taxes have been

removed).

•The fleet owner uses a card transaction company to process the

transaction, with the formula built in.

Other Ways Retail Fuel is Sold – Retail-Minus

• Another alternative way that fleets/end-users can purchase retail fuel is

called “retail-minus.”

• This is a formula that is based on the prevailing retail price at a

particular location, MINUS a negotiated rate.

• That end number is what is commonly called a “retail-minus” cost.

• Like Cost-Plus, the transaction is processed through a card transaction

company.

Cost-Plus vs. Retail-Minus

• Cost-Plus is attractive to fleet owners/end-users because rack prices fluctuate so

much. When rack prices go way down, the fleet/end-user gets that benefit.

• The downside is that prices also go up – BUT – many fleets/end-users “hedge” to

protect the upside.

• Retail-Minus is attractive to fleet owners/end-users that don’t have an appetite for

volatility and like to hedge. Because retail prices are slower to change, these costs

don’t fluctuate as much.

• Many card companies and truck stop chains are now willing to offer large fleet

companies the best of cost plus or retail minus to help provide a hedge for the

commercial fleet customer.

What Does This Mean For The US Fuel Retail Sector?

• Fuel retail sector is pivoting, not dying. Think Netflix, not Blockbuster.

• Fewer stations, particularly within cities.

> ICE bans/restrictions. And ‘local’ demand is most susceptible to PEV replacement.

> Shrinking margins and tougher EPA standards will likely mean more retail outlets shutting down.

• Bigger stations, particularly along highways.

> Commercial trucking demand will hold up relatively well.

• More hyper-marketers are going to enter the market.

• More and more refiners see retail as a great outlet for their production, they may or may not get

back into owning physical retail sites, but they will focus on branding up dealers with long term

supply agreements as demand further flattens.

• More consolidation and non-fuel partnerships. Jobbers will buy out other jobbers, becoming super

jobbers

• Greater diversity of fuels (including electricity) offered.

> But which fuel(s) to pick? Ethanol, biodiesel, EV’s, RNG, hydrogen and renewable diesel will all

play a greater role in the years ahead as government (state and federal) enact mandates.

• And yet…expansion opportunities do exist for those willing (and financially able!) to reinvent.