Kloza Goes 'Beyond The Screen'
OPIS analyst outlines challenges facing retailers in 2014, beyond
Published in CSP Daily News
CHICAGO -- Besides promising an uptick in the quality of hair offered by speakers like Walter Zimmermann and Todd Hale during the first day of NACS' State of the Industry (SOI) Summit, Oil Price Information Service (OPIS) chief oil analyst Tom Kloza vowed to take convenience store retailers "beyond the screen" during Thursday's "Motor Fuels Overview" general session.
When it comes to the oil business, simply following the futures market on CNBC, Bloomberg of Fox Business is not enough. Kloza said "there's a lot more than what meets the eye."
For example while the U.S. Energy Information Administration (EIA) would suggest that there was a 0.5% to 1% uptick in gasoline demand last year, OPIS' data suggests there was actually a 5% to 7% drop in demand compared to recent years.
One possible reason for the discrepancy? Organizations like OPIS and NACS (whose numbers also disagreed with the EIA projection) get their data from actual retailers.
"I think EIA does a great job at most things," Kloza said. "But I think measuring volume by how much is leaving terminals versus how much is actually being sold at stations is a bit of a fool's errand."
He continued, "It's an uphill battle in terms of gas demand for the next few years. We're challenged just like General Custer was challenged the morning of Little Bighorn. These are some big issues we're facing."
Some of the biggest fuel challenges include:
- Fewer cars on the road. The average recently dipped to under two vehicles per household.
- Less income spent on gasoline. OPIS predicts household income spent on gas will drop to $9 million in 2014.
- Better fuel mileage. Cars now gets an all-time high average of 25.4 miles per gallon.
- Technology advancements. From high-speed rail to even more fuel efficient (or hybrid) models, Kloza said "you have a lot of technology that's going to be adopted and really change gasoline demands in the coming years."
- New-car boom. Yes, it's good for fuel demand that people are keeping their cars around for longer periods of time (averaging 11.4-year-old cars), but Kloza points out that this means it won't be long before people trade in those old cars for newer, more fuel-efficient models.
- Population decreases. Baby boomers are starting to hit retirement age, and there are not enough drivers in the highly desired 35 to 54 "sweet spot" to make up for that loss in fuel. Over the next seven years, the number of drivers in the 35-to-54 demographic will decline by 3.4 million.
It's not all bad news: demand for traditional gas might be going down, but diesel is on the uptick.
"Diesel demand is moving higher," said Kloza. "I tell people they should really have it, if they don't already."
For more from the National Association of Convenience Stores' 2014 SOI Summit in Rosemont, Ill., watch for additional coverage in CSP Daily News. CSP Business Media is the exclusive media partner of the event.