Exhibit S 2012 NACS Fuels Report
THE U.S. PETROLEUM INDUSTRY: STATISTICS,
DEFINITIONS
Demand
Oil
Oil demand in 2011 was 88.1 million barrels per day
worldwide, an increase of 1.0 million barrels per day
over 2010. Demand is projected to increase to 89.4
million barrels per day in 2012 and 90.9 million
barrels per day in 2013. (Source: U.S. Energy
Information Administration, Short-Term Energy
Outlook, January 10, 2012)
Most of the expected growth for oil demand in 2012
will come from non-OECD (Organization for
Economic Cooperation and Development) countries,
most notably China, the Middle East and Brazil, more
than offsetting the demand decline in Europe.
(Source: U.S. Energy Information Administration,
Short-Term Energy Outlook, January 10, 2012)
The United States uses petroleum more for
transportation needs (70% of total demand) than
heat and power. As a result, demand peaks in the
summer as people travel more, opposite to most of
the world where demand for oil peaks in the coldest
months. (Source: U.S. Energy Information
Administration)
U.S. petroleum consumption was an estimated 18.87
million barrels per day in 2011, and is expected to
increase to 18.96 million barrels per day in 2012 and
19.09 million barrels per day in 2013. (Source: U.S.
Energy Information Administration, Short-Term
Energy Outlook, January 10, 2012)
There are 199 widely traded crude oil streams
traded on the markets, with the two most popular
being West Texas Intermediate (WTI) and Brent
Blend. (Source: Crude Oil Market Handbook)
Motor Fuels
There were 246.3 million registered vehicles in the
United States in 2009, of which 134.9 million were
passenger vehicles. (Source: U.S. Federal Highway
Administration)
The average miles travelled per licensed driver
decreased slightly to 13,060 miles in 2001, but is
expected to gradually increase to 15,280 by 2035.
(Source: U.S. Energy Information Administration,
Annual Energy Outlook 2011)
U.S. gasoline demand decreased to an average of
8.75 million barrels per day in 2011, approximately
368 million gallons per day, or about 41 million fill-
ups per day (based on a 9-gallon fill-up). Demand is
projected to continue to decline to 8.74 million
barrels per day in 2012 and to 8.72 million barrels
per day in 2013. (Source: U.S. Energy Information
Administration, Short-Term Energy Outlook, January
10, 2012)
Based on the latest available vehicle data and
demand numbers, the American drivers use 1.49
gallons of gasoline per day, which averages out to
10.44 gallons per week or 544.6 gallons per year per
vehicle. (Source: U.S. Energy Information
Administration)
Americans travelled 8.105 billion miles per day in
2011, and are expected to travel 8.158 billion miles
per day in 2012. This equates to an average of 33
miles per vehicle per day. (Source: U.S. Energy
Information Administration, Short-Term Energy
Outlook, January 10, 2012)
The sales of new clean diesel automobiles jumped
27.4% in 2011. (Source: Hybridcars.com)
Diesel automobile sales are approximately 3% today
but are expected to grow to 7.4% of the car market
by 2017. (Source: J.D. Power & Associates)
Battery-operated vehicles, such as the Nissan Leaf,
are projected to have annual sales in 2020 of
100,000 units in the U.S. and 1.3 million worldwide
— 1.8% of the 71 million cars that are expected to
be on the road in 2020. Another 3.9 million plug-ins
and hybrids will be sold worldwide, bringing the total
electric and hybrid market to about 7% of all cars
sold in 2020. (Source: J.D. Power & Associates, Drive
Green 2020: More Hope Than Reality)
From 2009 to 2035, transportation sector energy
consumption is expected to grow at an average
annual rate of 0.6% (from 27.2 quadrillion Btu to
31.8 quadrillion Btu), slower than the 1.2% average
rate from 1975 to 2009. The slower growth is a
result of changing demographics, increased LDV fuel
economy and saturation of personal travel demand.
(Source: U.S. Energy Information Administration,
Annual Energy Outlook 2011)
U.S. monthly demand for gasoline increases over the
first half of the year and peaks in the warmer
months:
Month in 2011 Gasoline demand
(million barrels/day
Change from
month prior
January 8.693 -6.4%
February 8.899 +2.4%
March 8.991 +1.0%
April 9.037 +0.5%
May 9.082 +0.5%
June 9.278 (high) +2.1%
July 9.113 -1.8%
August 9.169 +0.6%
September 8.917 -2.7%
October 8.657 (low) -2.9%
November 8.664 +0.0%
December 8.720 +0.6
(Source: U.S. Energy Information Administration,
“Weekly Average U.S. Product Supplied of Finished
Motor Gasoline”)
In 2011, weekly demand was at its lowest the week
of October 21 (8.50 million barrels/day; gas prices
averaged $3.46) and at its highest the week of June 6
(9.37 million barrels/day; gas prices averaged $3.78).
(Source: U.S. Energy Information Administration,
“Weekly Average U.S. Product Supplied of Finished
Motor Gasoline”)
Supply
U.S. oil production in 2011 was 5.57 million barrels
per day, an increase from 5.51 million barrels per
day in 2010, and is expected to increase to 5.74
million barrels per day in 2012 and 5.82 million
barrels per day in 2013. (Source: U.S. Energy
Information Administration, Short-Term Energy
Outlook, January 10, 2012)
U.S. ethanol production was 1.179 million barrels
per day in 2011 and is expected to increase to 1.210
million barrels per day in 2012. Ethanol accounted
for 1.105 million barrels of the country’s 18.87
million barrels per day demand in 2011. (Source: U.S.
Energy Information Administration, Short-Term
Energy Outlook, January 10, 2012)
U.S. biodiesel supply was 0.110 million barrels per
day in 2011 and is expected to increase to 0.121
million barrels per day in 2012. (Source: U.S. Energy
Information Administration, Short-Term Energy
Outlook, January 10, 2012)
U.S. Imports
In 2011, for the first time since 1949, the United
States was a net exporter of petroleum products —
largely because of exports of low sulfur diesel fuel,
gasoline and petroleum coke, which is used to make
steel. Gross exports averaged 380,000 barrels per
day in 2011 and this trend is expected to continue,
with gross exports expected to be 310,000 barrels
per day in 2012 and 290,000 barrels per day in 2013.
(Source: U.S. Energy Information Administration,
Short-Term Energy Outlook, January 10, 2012)
In 2011, the U.S. imported 8.66 million barrels per
day of crude oil and finished petroleum products.
Imports accounted for 45.9% of U.S. petroleum
supply. (Source: American Petroleum Institute, Jan.-
Sept. 2011 average)
The United States imported less than half (49%) of
the oil it consumed in 2010, a sharp drop from 2005
when imports were 60% of U.S. oil consumed.
(Source: U.S. Energy Information Administration)
The top five importers of petroleum (crude oil and
finished products) to the United States in 2011 were:
Canada (27.6% of U.S. imports)
Saudi Arabia (13.7%)
Venezuela (11.0%)
Nigeria (9.9%)
Mexico (7.7%)
(Source: American Petroleum Institute, Jan.-Sept.
2011 average)
The United States imports half of its oil from OPEC
countries: 52.2% of total imports came from OPEC;
only 21.0% of total imports came from Persian Gulf
countries. (Source: American Petroleum Institute,
Jan.-Sept. 2011 average)
Stocks and Inventories
There are 7 billion to 8 billion barrels of crude oil tied
up in worldwide stocks at any given time — from the
wellhead to the consumer, filling tankers, pipelines,
railcars and trucks — linking all of the markets.
(Source: U.S. Energy Information Administration)
Holding inventory costs money — approximately
$1.50 a barrel per month for oil if a company owns
the tank storage facility and $4 per barrel per month
if the storage is rented. For gasoline, the costs are
approximately $2 and $6, or about 1 cent per gallon
per month if the storage space is rented. Thus,
companies try to manage their inventories as
efficiently as possible. (Source: U.S. Energy
Information Administration)
Strategic Petroleum Reserve
The U.S. Strategic Petroleum Reserve (SPR) is the
largest stockpile of government-owned emergency
crude oil in the world. It was established in 1975 in
the aftermath of the 1973-1974 oil embargo to
provide emergency crude oil supplies for the United
States. The oil is stored in underground salt caverns
in Texas and Louisiana, with a planned expansion in
Mississippi. (Source: U.S. Department of Energy)
In December 2009, the SPR reached capacity at
726.6 million barrels. Following three separate
drawdowns in 2011, its inventory as of October 201 1
was 695.9 million barrels. Based on net petroleum
estimates, this stockpile would provide 86 days of
import protection. (Source: U.S. Department of
Energy)
The maximum drawdown capability of the SPR is 4.4
million barrels per day. It would take 13 days from
the time a presidential decision was made to tap the
SPR for oil to enter the U.S. market. (Source: U.S.
Department of Energy)
Electric Vehicle Charging
Nearly 13,000 public chargers were expected to be
in the ground by the end of 2011. (Source: “Charged
for Battle”: Jan. 3-9, 2011, Bloomberg
BusinessWeek)
Refining
ExxonMobil has the largest U.S. refinery located in
Baytown, Texas, which processes 560,640 barrels of
crude oil per day. However, when expansion is
complete in 2012 of the Motiva refinery in Port
Arthur, Texas, it will have a capacity of 600,000
barrels of crude oil per day, making it the largest in
the United States and one of the 10 largest in the
world. (Source: U.S. Energy Information
Administration, Motiva Enterprises LLC)
Planned periodic shutdowns of refineries, called
“turnarounds,” allow for the regular maintenance,
overhaul, repair, inspection and testing of plants and
their process materials and equipment. They are
scheduled at least 1 to 2 years in advance, and
usually when demand for refined product is at its
lowest level, typically early in the year.
At this time, refineries also convert their “crackers”
so that they can refine summer-blend fuel. (Source:
American Petroleum Institute)
The length of a refinery turnaround is typically 1
week to 4 weeks, depending on the unit and the
amount of maintenance needed.
The industry average is about four years between
turnarounds for catalytic cracking units. (Source:
American Petroleum Institute)
Approximately half of the U.S. refineries have closed
over the past three decades. In 1982 (the earliest
data provided), there were 301 operational
refineries.
Today, there are 148 operational refineries. The last
major refinery built in the United States was in 1976.
(Source: U.S. Energy Information Administration)
Despite the precipitous drop in the number of
refineries operating in the United States, domestic
refining capacity has not declined by an equal
percentage. Increases in facility size and
improvements in efficiencies have offset much of the
lost physical capacity of the industry.
In 1982, the United States had a combined capacity
of 17.9 million barrels of crude oil per day. In 2011
combined capacity was 17.7 million barrels per day.
(Source: U.S. Energy Information Administration)
Distribution
U.S. Infrastructure
The U.S. petroleum distribution industry includes:
148 refineries
200,000 miles of crude oil and refined
petroleum product pipelines
38 Jones Act vessels (U.S. flag ships that
move products between U.S. ports)
3,300 coastal, Great Lakes and river tank
barges
200,000 rail tank cars
1,400 petroleum product terminals
100,000 tanker trucks
(Source: National Petrochemical and Refiners
Association)
Tankers
Shipping oil from Venezuela to the U.S. takes
approximately 6 to 8 days (roundtrip); shipping oil
from the Middle East to the United States takes
between 40 to 45 days (roundtrip). During this
journey, the price — and ownership — of the oil can
change a number of times. (Source: American
Petroleum Institute)
Crude oil from the Middle East is moved mainly by
Very Large Crude Carriers (VLCCs) capable of
delivering 2 million barrels per trip. (Source: U.S.
Energy Information Administration)
Pipelines
The first oil pipeline in the United States was built in
1865, following the 1859 discovery of oil in
Pennsylvania. Today, pipelines are the most
important petroleum supply line in the United States
for transporting crude oil, refined fuel and raw
materials. Pipelines move 71% of the ton-miles of
petroleum transported annually. The rest is
transported via water carriers (22%), trucks (4%) or
rail (3%). (Source: Association of Oil Pipe Lines)
In addition to crude oil, pipelines, which range in size
from eight inches to over 30 inches, transport more
than 50 refined petroleum products, including
various grades of motor gasoline, home heating oil,
diesel fuel, aviation fuel, jet fuels and kerosene.
(Source: Association of Oil Pipe Lines)
Interstate pipelines deliver more than 11.3 billion
barrels of petroleum each year, of which 52% is
crude oil; the remaining is refined product. The cost
to transport a barrel of refined gasoline from
Houston to the New York harbor is about $1, which
equates to about 2.4 cents per gallon. (Source:
Association of Oil Pipe Lines)
The Colonial Pipeline, the major product pipeline
that stretches from Texas to New Jersey, transports
almost 40 different formulations of gasoline alone —
different grades of each mandated type of gasoline,
the requirements for which vary seasonally and
regionally. Liquefied ethylene, propane, butane and
some petrochemical feedstocks are also transported
through oil pipelines. (Source: Association of Oil Pipe
Lines)
Product moves through pipelines at 3 to 8 miles per
hour (about a walking pace) depending upon line
size, pressure and other factors such as the density
and viscosity of the liquid being transported. At
these rates, it takes from 14 days to 22 days to move
liquids from Houston to New York City. (Source:
Association of Oil Pipe Lines)
There are approximately 200,000 miles of oil and
refined product pipelines in the United States.
(Source: Association of Oil Pipe Lines)
Types of Fuel Sales
Petroleum products may be sold at any of the
following levels:
Spot market — refers to the one-time sale
of a quantity of product “on the spot,” in
practice typically involving quantities in
thousands of barrels at a convenient
transfer point, such as a refinery, port or
pipeline junction. Spot prices are commonly
collected and published by a number of
price-reporting services.
Terminal, or “rack” — sales of product by
the truckload (typically about 8,000 gallons
to 9,000 gallons) at the loading rack of a
product terminal, supplied from a refinery,
pipeline or port.
Dealer tank wagon, or “DTW” — sales of a
truckload or less of product, delivered into
storage at a retail outlet.
Retail — sales to the consumer, normally
occurring at a service station, convenience
store or other retail outlet. Larger
consumers, such as commercial or
government vehicle fleets, may buy directly
from wholesalers in larger quantities.
(Source: “Gasoline Price Pass-through,” published
January 2003 by the U.S. Energy Information
Administration)
Prices & Expenses
Prices
With 42 gallons in each barrel of oil, a $1 change in
the price of a barrel of oil roughly translates to a 2.4-
cent change per gallon at the pump.
West Texas Intermediate spot oil prices averaged
$94.86 per barrel in 2011, up from $79.40 per barrel
in 2010. They are expected to average $100.25 in
2012. (Source: U.S. Energy Information
Administration, Short-Term Energy Outlook, January
10, 2012)
The average cost of imported oil was $102.29 per
barrel in 2011 and is expected to reach $103.81 per
barrel in 2012. The refiner average acquisition cost
(which includes both domestic and imported oil
prices) was $101.44 per barrel in 2011. It is expected
to increase to $103.44 per barrel in 2012 and
$105.77 per barrel in 2013. (Source: U.S. Energy
Information Administration, Short-Term Energy
Outlook, January 10, 2012)
U.S. retail (regular) gasoline prices averaged $3.53 in
2011, and are expected to average $3.48 per gallon
in 2012. On-road diesel fuel averaged $3.84 per
gallon in 2011, and is expected to increase to $3.85
per gallon in 2012. (Source: U.S. Energy Information
Administration, Short-Term Energy Outlook, January
10, 2012)
Gasoline prices were 74 cents per gallon higher in
2011 than in 2010, largely because of the higher
costs of crude oil (59 cents per gallon) and higher
refinery margins (12 cents per gallon). (Source: U.S.
Energy Information Administration, Short-Term
Energy Outlook, January 10, 2012)
The year 2012 began with gas prices at a record high
to start a year and nearly double the prices from
2009.
2012: $3.30 per gallon
2011: $3.07
2010: $2.67
2009: $1.68
2008: $3.11
2007: $2.33
(Source: U.S. Energy Information Administration,
Gasoline and Diesel Fuel Update)
Since 2005, wholesale diesel fuel prices have been
higher than wholesale gasoline prices, as world
demand for diesel fuel, primarily in emerging
economies, outpaced demand for gasoline.
Wholesale diesel fuel prices were 16 cents higher
than wholesale gasoline prices in 2011 and are
projected to be 19 cents per gallon higher than
wholesale gasoline in 2012 and 21 cents per gallon
higher in 2013.
From 1990 to 2005, wholesale diesel fuel prices
ranged from 5 to 11 cents per gallon higher than
wholesale gasoline prices. (Source: U.S. Energy
Information Administration, Short-Term Energy
Outlook, January 10, 2012)
Estimates showed that the price “pass-through”
from the spot to the retail market is complete within
two-and-one-half months, with about 50% of the
change occurring within two weeks and 80% within
four weeks. The average speed of pass-through is
significantly more rapid for diesel fuel, possibly
reflecting fewer middlemen, on average, transacting
for each gallon of diesel fuel as opposed to gasoline.
(Source: “Gasoline Price Pass-through,” published
January 2003 by the U.S. Energy Information
Administration)
Price volatility has been extreme since 2000. Crude
oil prices have fluctuated between a low of $18.28 in
November 2001 to a high of $147.27 per barrel in
July 2008. Gasoline prices fluctuated between a low
of $1.06 in December 2001 to a high of $4.11 in July
2008. (Source: AAA/U.S. Energy Information
Administration data)
Since final implementation of the Clean Air Act
Amendments in 2000, the seasonal transition to
summer-blend fuel has helped gasoline prices
significantly before they reached their peak, with
increases ranging from a low of 20 cents in 2003 to a
high of $1.13 in 2008. The average annual increase
since 2000 is 54 cents.
Year Date Price Peak Date Price Increase
2011 Feb. 7 $3.132 May 9 $3.965 $0.833
2010 Feb. 1 $2.661 May 10 $2.905 $0.244
2009 Feb. 2 $1.892 June 22 $2.691 $0.799
2008 Feb. 4 $2.978 July 21 $4.104 $1.126
2007 Feb. 5 $2.191 May 21 $3.218 $1.027
2006 Feb. 6 $2.342 May 15 $2.947 $0.605
2005 Feb. 7 $1.909 April 11 $2.280 $0.371
2004 Feb. 2 $1.616 May 24 $2.064 $0.448
2003 Feb. 3 $1.527 March 17 $1.728 $0.201
2002 Feb. 4 $1.116 April 8 $1.413 $0.297
2001 Feb. 5 $1.443 May 14 $1.713 $0.270
2000 Feb. 7 $1.325 June 19 $1.681 $0.356
(Source: U.S. Energy Information Administration)
Taxes
Gasoline excise taxes averaged 48.8 cents per gallon
in January 2012, which includes 18.4 cents per gallon
in federal taxes. (Source: American Petroleum
Institute)
The states with the highest gasoline taxes, as of
January 2012, are:
New York (67.4 cents per gallon)
California (67.0 cents)
Connecticut (67.0 cents)
(Source: American Petroleum Institute)
The states with the lowest gasoline taxes, as of
January 2012, are:
Alaska (26.4 cents per gallon)
Wyoming (32.4 cents)
New Jersey (32.9 cents)
(Source: American Petroleum Institute)
Diesel fuel taxes averaged 54.0 cents per gallon in
January 2012, which includes 24.4 cents per gallon in
federal taxes, from a high of 75.9 cents per gallon in
California to a low of 32.4 cents per gallon in Alaska.
(Source: American Petroleum Institute)
Expenses
Producing a barrel of oil costs $33.76 in the United
States. About two-thirds of the cost is associated
with finding the oil and gas, and the other third is
associated with lifting it from the ground. In the
United States, it is much more expensive to produce
oil and gas offshore ($51.60) than onshore ($31.38).
The average producing cost in all other countries is
$25.08, with a low of $16.88 in the Middle East.
(Source: “Performance Profiles of Major Energy
Producers, 2009,” U.S. Energy Information
Administration)
Factoring in all gasoline sales — whether the
customer paid by cash, check or by either debit or
credit card — credit and debit card fees averaged 4.7
cents per gallon in 2010. Convenience store industry
credit and debit card fees ($9.0 billion) in 2010 were
again more than convenience store industry profits
($6.5 billion). (Source: NACS State of the Industry
data)
Two thirds (66%) of all transactions at the pump are
by plastic — either debit or credit card — but many
markets see card usage at 80% or more, with some
stores seeing 100% payment by plastic (Sources:
NACS 2012 Consumer Fuels Report, member
surveys)
Margins
The gross margin (or markup) on gasoline in 2011
was 18.5 cents/gallon, or 5.3%. Over the past five
years, retailer gross margins have averaged 15.4
cents per gallon. (Source: OPIS)
On a cents-per-gallon basis, gross margins set a
record in 2011. However, on a percentage basis,
margins in 2011 were near the 13-year low set in
2007.
2011 – 18.5 cents (5.3% of cost of fuel)
2010 – 16.3 cents (5.9%)
2009 – 13.1 cents (5.6%)
2008 – 18.0 cents (5.6%)
2007 – 14.2 cents (5.1%)
2006 – 13.8 cents (5.4%)
2005 – 14.8 cents (6.5%)
2004 – 12.8 cents (7.0%)
2003 – 13.2 cents (8.5%)
2002 – 9.7 cents (7.2%)
2001 – 12.2 cents (8.5%)
2001 – 12.7 cents (8.5%)
1999 – 13.0 cents (11.1%)
(Source: OPIS)
Retail Operations
Branding
While about half of the more than 120,950
convenience stores selling gasoline are “branded”
outlets selling a specific oil refiner’s brand of fuel,
they are typically not owned by the refiner. This is
even more apparent with the five major integrated
oil companies. Three of them (ExxonMobil, BP and
Conoco Phillips) are in the process of selling all of
their retail assets, leaving only Shell and
ChevronTexaco owning stores. Today, major oil
companies own less than 1% of all convenience
stores in the U.S. and that percentage continues to
decline.
Major oil companies own very few retail fueling
outlets, but many stations do have contracts to sell a
specific brand of fuel. The top branded retail outlets
in 2010 were:
Shell Oil Products U.S. (14,000 sites)
BP America Inc., including ARCO (11,300
sites)
ExxonMobil (9,763 sites)
Chevron Products Co (8,251 sites)
ConocoPhillips (7,150 sites)
(Note: These figures include all gasoline retailers, not
just convenience stores) (Source: National
Petroleum News’ MarketFacts 2011)
Fueling Sites
There were 157,393 total retail fueling sites in the
United States in 2011. This is a steep and steady
decline since 1994, when the station count topped
202,800 sites. (Source: National Petroleum News’
MarketFacts 2011)
As of December 31, 2011, there were 120,950
convenience stores selling motor fuels in the United
States. This represents 81.7% of the 148,126
convenience stores in the country. (Source:
NACS/Nielsen Convenience Industry Store Count)
Convenience stores sell 81% percent of the motor
fuels purchased in the United States. (NACS State of
the Industry data)
Most convenience stores selling motor fuels are one-
store operations; 58.2 percent (70,403 stores) of the
country’s 120,950 convenience stores selling fuels
are one-store operations. By contrast, less than 1
percent are owned and operated by the integrated
oil companies, of which only ExxonMobil Corp. (540
stores), Chevron Corp. (403 stores) and Shell (23
stores) still operate stations. (Sources: NACS/Nielsen
Convenience Industry Store Count; Nielsen data)
In addition to convenience stores and gas stations,
there are a number of big-box retailers that sell fuel.
The top five hypermarkets, by store count, in fuels
retailing are:
Walmart (1,066 stores)
Kroger (1,035)
Sam’s Club (462)
Safeway (322)
Costco (321)
(Source: Energy Analysts International, July 2011)
As of July 2011, 4,936 hypermarket retail fueling
sites sold an estimated 11.6% of the motor fuels
purchased in the United States. These sites sell
approximately 283,000 gallons per month, more
than twice the volume of a traditional fuel retailer.
(Source: Energy Analysts International)
Sales
Motor fuels sales in convenience stores totaled
$385.2 billion in 2010 and accounted for more than
two-thirds of the convenience store industry’s sales
in 2010 (66.9%). However, because of low margins,
motor fuels sales contributed less than one-third of
total store gross margins dollars (26.4%).
The average convenience store in 2010 sold roughly
124,000 gallons of motor fuels per month, which
translates into approximately 4,000 gallons per day.
(Source: NACS State of the Industry data)
Nearly three-quarters (73%) of all fuels customers at
convenience stores do not purchase an in-store
item. Interestingly, pay-at-the-pump purchasers are
more likely to buy something inside the store. One
third (33%) of pay-at-the-pump customers buy
something inside the store, compared to only 19% of
customers who pay inside. (Source: VideoMining
Corp., 2010)
Sales of premium and mid-grade have declined over
the past decade as consumers trade down octane
levels when prices increase. The sale of mid-grade
and premium has declined from 30.2% of gasoline
gallons purchased in 1998 to 15.9% by 2006, before
bouncing back slightly in the ensuing years as more
vehicles require higher octanes.
Percent of Total Gasoline Gallons Sold
Year Regular Mid-Grade Premium
2010 80.9 12.8 6.3
2009 83.2 11.7 5.2
2008 82.9 10.4 6.7
2007 81.5 11.0 7.5
2006 84.1 9.3 6.6
2005 81.2 10.7 7.7
2004 81.4 10.2 7.2
2003 78.5 12.1 9.4
2002 77.3 13.0 9.7
2001 79.2 12.5 8.3
2000 78.1 13.1 8.8
1999 73.3 14.4 12.4
1998 69.8 15.4 14.8
(Source: NACS State of the Industry data)
Gasoline theft, also called “drive-offs,” is a problem
at stores that don’t require prepay. The average loss
per store in 2010 was $1,440, considerably more
than in 2009, when the figure was $761. However, it
is difficult to calculate an industry-wide number,
since prepay is the norm at the vast majority of
stores. Gasoline theft peaked in 2005 when it cost
the industry an estimated $300 million. It has
declined considerably since September 2005 (post-
Hurricane Katrina when gasoline rapidly increased
and topped $3 per gallon) as more stations began
mandating prepay to stop theft. (Source: NACS State
of the Industry data)
Glossary of Terms
Balkanization: The end-result of the patchwork quilt
of unique fuels required throughout the United
States. Unique fuel regulations have created gasoline
zones across the U.S. where only certain fuels can be
sold. This “Balkanization” of the fuel supply has
made it more expensive and difficult to produce and
deliver gasoline.
Boutique Fuels: Unique gasoline blends required for
a specific region or metropolitan area of the U.S.
Prior to 1990, six types of gasoline were sold in the
United States. Today, there are approximately 20
unique gasoline formulations manufactured for, and
sold within, specific markets throughout the country
that are mandated by federal, state, and local
governments. These boutique fuels are not
interchangeable with fuel blends sold in other areas
of the country. Federal law limits the number of
boutique fuels authorized for use in the nation, but
does not include state biofuel mandates in its
definition of these fuels. Consequently, states have
proceeded to require the use of certain biofuel
products. These mandates pose similar challenges to
the motor fuels supply and distribution system as
other types of regulated boutique fuels.
Branded Retail Outlet: A retailer that sells a motor
fuel with the brand name of a major oil company,
but is not necessarily owned (and is usually not
owned) by that oil company. Branded retailers
benefit from marketing and advertising support,
consumer brand loyalty and priority access to
gasoline supplies. Lately, a new benefit has emerged,
with branded stations participating in loyalty
programs with grocery chains, in particular. In
return, the branded marketer pays a surcharge for
the use of the brand and the benefits that come with
it.
Ethanol-Blended Fuels (E10, E15, E85, etc.): E10
(90% gasoline and 10% ethanol) is approved for use
in all new U.S. automobiles. In October 2010, the
U.S. Environmental Protection Agency approved the
use of E15 in vehicles in the fleet of 2007 or later,
and in January 2010 extended that to include
vehicles made since 2001. However, a number of
issues — including retailers’ concerns over liability
and demand — may limit the growth of these
higher-blend sales.
Reformulated Gasoline (RFG): The 1990 Clean Air
Act required the nation’s most polluted
metropolitan areas to sell a special blend of gasoline
during summer months to reduce the emissions of
ozone forming volatile organic compounds (VOCs)
and toxic air pollutants. The first phase of the RFG
program began in 1995 and the second (current)
phase began in 2000. RFG is required in cities with
high smog levels and is optional elsewhere. RFG is
currently used in 17 states and the District of
Columbia. About 30 percent of gasoline sold in the
U.S. is reformulated.
Fungible: Interchangeable. The U.S. gasoline system
was designed to facilitate the efficient flow of
gasoline to all regions of the nation, allowing the
same gasoline formulation to be sold in all markets.
The system is no longer fungible, with approximately
20 unique gasoline formulations required in specific
markets throughout the United States.
Organization of Petroleum Exporting Countries
(OPEC): OPEC an international organization of 11
developing countries — from Africa, Asia, the Middle
East and Latin America — that are heavily reliant on
oil revenues as their main source of income. OPEC’s
members — Algeria, Indonesia, Iran, Iraq, Kuwait,
Libya, Nigeria, Qatar, Saudi Arabia, the United Arab
Emirates and Venezuela — collectively supply about
40% of the world’s oil output, and possess more
than three-quarters of the world’s total proven
crude oil reserves. Twice a year, or more frequently
if required, the oil and energy ministers of OPEC
member countries meet to decide on its output
level, and consider whether any action to adjust
output is necessary in the light of recent and
anticipated oil market developments.
Petroleum Administration for Defense Districts
(PADD): The U.S. Department of Energy divides the
United States into five regions for planning
purposes. The result is a geographic aggregation of
the 50 states and the District of Columbia into five
Districts, each operating essentially as its own
market. The five districts are: PADD I (East Coast,
PADD II (Midwest), PADD III (Gulf Coast), PADD IV
(Rocky Mountain) and PADD V (West Coast).
(Graphic courtesy of Association of Oil Pipe Lines)
Pass-Through: The time from which wholesale price
changes fully reach consumers. Wholesale gasoline
price increases — or decreases — paid by retailers
are not immediately passed on to consumers, but
are spread over a period of time. A large portion of
the price change is passed through immediately,
with the rest spread over a period of time that could
be as long as eight weeks. Pass-throughs help
minimize the price volatility of gasoline.
Refinery: Where crude oil is refined into a specific
blend of gasoline or other fuels (such as diesel,
kerosene, etc.) or for other oil-based applications.
There are currently 148 operable refineries in the
U.S. — less than half the number 30 years ago. In
addition, production capacity has decreased from
18.6 in 1981 to 17.6 million barrels per day today.
No major new refinery has been built in the United
States since 1976.
Replacement Costs: The cost to acquire the next
shipment of fuel. This price is almost always
different than the cost of the gas that retailers have
in their tanks. Because of the enormous volume of
fuel sold — a typical store sells more than 120,000
gallons of gas a month — retailers must price their
fuel based on their estimated cost of the next
delivery. Even slight wholesale price variations can
increase a retailer's replacement cost by hundreds
— or even thousands — of dollars. The importance
of replacement costs is particularly acute for smaller
businesses, which have less cash on hand to meet
payments.
Retailer: Refers to convenience stores that sell
motor fuels. As of December 31, 2011, a total of
120,950 convenience stores were selling motor fuels
in the U.S. (81.7% of country’s 148,126 convenience
stores). These fuels retailers are also referred to as
“petroleum marketers.”
Spot Market: This market is usually comprised of
motor fuels that have not been pre-allocated to the
integrated or branded outlets.
Retailers and other fuel distributors purchase fuel at
terminals, or “racks,” where costs fluctuate based on
current prices.
Summer-Fuel Blends: Several state and local
governments have developed fuel regulations to
control for the formation of smog during summer
months.
These generally require that gasoline sold during the
summer have a lower Reid vapor pressure (RVP),
which measures the gasoline's potential to emit
vapors, which contribute to the formation of smog.
Terminal: A bulk gasoline terminal is a gasoline
storage facility that receives gasoline by pipeline,
ship or barge, and has a gasoline throughput greater
than 20,000 gallons per day. The loading rack at the
terminal is the broad term for the loading arms,
pumps, meters, shutoff valves, relief valves and
other piping and valves that fill delivery tank trucks
picking up product at the terminal.
Tight Supplies: Describes a situation in which
demand for gasoline — or crude oil — exceeds the
supply available, and prices rise based on this
supply/demand imbalance. Also known as “market
shorts” or “upsets.”
Ultra Low Sulfur Diesel (ULSD): ULSD is a clean-
burning diesel fuel that is defined by the United
States Environmental Protection Agency (EPA) to
have a maximum sulfur content of 15 parts per
million (ppm). It was phased into use between 2006
and 2010.