Understanding Today’s Unstable Demand and Tightened Supply
As the 2022 summer travel season peaked, there was nothing short of an astronomical climb in demand for air travel, leaving fuel buyers scrambling to find supply. The strange thing is the related runouts weren’t due to a lack of planning or being surprised by sudden demand spikes — far from it. Industry pros noticed increasing demand for some time with the gradual return to something closer to normal in the wake of COVID-19. The truth is fuel sellers are running out of product on purpose, but why?
There is incredible economic uncertainty as people return to in-office work, schools are largely back to in-classroom teaching, and, as mentioned, there’s skyrocketing air travel demand. However, inflation is at a high not seen since the 1970s and is showing no signs of slowing down in the foreseeable future. More and more oil market analysts are expecting a downturn — and that’s if the next rate hike by the Federal Reserve doesn’t tip the country into a recession — which is far from assured.
This uncertainty has downstream professionals second-guessing almost every market move they make. In this game of musical chairs, they’d rather not be in the room at all when the music stops. This has, of course, increased pressure on the jobbers who very much depend on that game for their livelihood.
What’s a fuel buyer to do?
For fuel buyers, it’s getting harder to meet customer demand. You’d think fuel sellers would want to sell as much product as possible to make a profit. But that’s part of the problem. The big fear for fuel sellers isn’t so much demand that they might run out; it is the fear of having so much supply they would have to sell at a loss because the tank’s real estate is currently more valuable than the unwanted fuel. This is what’s increasing product shortages.
Where can a fuel buyer find product? What about day deals? No, those are more trouble than they’re worth. You must spend all day on the phone, calling individual fuel sellers, keeping multiple windows open on your computer, and constantly refreshing your portal. Then — if you’re lucky enough to find the product you need — you send your office staff into a giant hole of paperwork that will consume the rest of their day (at least).
In an era where online purchases are the expected method of transaction for almost any product you don’t put directly into your mouth (and even some that you do), why doesn’t the downstream energy industry have a true online marketplace?
On the fuel seller side
As stated, fuel sellers fear having unsellable inventory, and rightly so; selling at a loss does not sustain a business for long. Fuel sellers live and die on staying in motion, never standing still. Knowing where demand is, where to move inventory, and moving quickly to profit on day deals is key to fuel seller success in this unstable, inflation-fueled market.
Not every large municipality is assuming normal refined fuel consumption at the same pace, so fuel sellers must closely monitor their markets and remain agile. Just because there’s a sudden spike in demand in one area doesn’t always warrant product movement. If fuel sellers try to catch up to demand, it may not remain high once the product gets there — that is what fuel sellers fear.
There are options
With Energy Digital Commerce from DTN, fuel sellers can post product, and fuel buyers can receive an immediate notification. Not only that, but DTN takes care of the back end, so there are no wasted hours around negotiating and bookkeeping. And with the company’s Refined Fuels Demand solution, fuel sellers get specific, market-based demand data so they know where and when to post product for sale.
To learn more about how DTN can help you maintain business in tumultuous times, contact us today for a demonstration.