For commuters worldwide, it is all too common to keep a close eye on retail fuel prices, looking to find a station with the best gasoline price along their way home. It seems that no other commodity quite captures the global population’s attention when it suddenly becomes more expensive.
However, interest in fuel pricing is not limited to the general public. The fluctuation of wholesale fuel prices is constantly under the watchful eye of financial and economic analysts the world over.
Keeping up with constantly changing fuel prices is no easy task, though. Thankfully, Refined Fuels Demand from DTN has made the skewed views, recording errors, and limited sampling that has historically impeded reliable demand data collection a non-issue.
With this program, you will find reliable, historical data and current individual refined product volumes that impact city-level demands, thus enabling you to be confident in your decisions while saving you time and increasing profit margins.
The retail sector of fuel prices is obviously the most visible to the public – it’s displayed prominently along the street in giant neon numbers for everyone to see. There are even flyers and coupons delivered to advertise gas prices in some countries. But what about wholesale fuel? What is the difference between wholesale fuel and retail fuel?
What is retail fuel?
Fuel sellers further downstream, like those running gas stations, purchase fuel in large quantities at wholesale prices. Then, they transport it to individual retail locations to sell it to end consumers – commuter vehicles filling up at the pump. Essentially, these suppliers act as mediators between wholesalers and consumers, providing the product in a limited quantity at their own decided price.
Retail fuel is often supplemented with additives, like ethane, to boost performance and serve as a marketing point. In addition, there are often different options available to consumers at the pump — regular, mid-grade, or premium — each with a slightly different price.
Retail fuel prices
Retail fuel is subject to not only consumer demand but is also impacted by numerous additional financial costs. For example, some countries have regulations and standards requiring retailers to adhere to further refinement processes and even other additives. The amount and price of additives can vary by season as well. Most companies have winter and summer fuel blend options for optimized fuel efficiency to compensate for weather conditions.
Retailers are subject to marketing costs such as compensating for location. Retailers may need additional marketing if their location isn’t ideal or not highly trafficked. If they are in a heavily populated area surrounded by their competitors, they may need to market why their site, product, or pricing is better.
Companies can also face additional fuel and carbon taxes based on location, set by federal, provincial, or state laws. In fact, in some countries, fuel taxes account for more than half of the retail price.
What is wholesale fuel?
Wholesale fuel is purchased directly from a wholesale supplier instead of a retail supplier down the chain. Because it isn’t as impacted by pricing elasticity (the measurement of how much the demand for a product changes when its price increases or decreases), the price tends to remain more constant and typically much lower.
A significant difference to note is that while the cost of crude oil is the greatest factor in determining fuel prices, wholesale gas should not be confused with crude oil. Crude oil is a raw petroleum product that is further refined into different types of fuel, such as gasoline, diesel, and kerosene.
Wholesale fuel prices
Many of the factors involved with retail prices don’t apply to wholesale fuel. For example, retail locations may need to provide additional services like coffee shops, food markets, or a car wash to increase foot traffic and attract customers. Retail gas suppliers have other financial responsibilities that influence their selling price points as well. These responsibilities can include such expenses as employee wages and costs of benefits or rent and leasing costs.
Since a wholesale supplier is not subject to as many of the above factors, they can sell fuel at much lower prices. In addition, wholesalers can typically boast a dependably fixed cost.
Advantages of wholesale fuel
Obviously John Smith, who uses his vehicle to get around day to day won’t generally have access to wholesale fuel prices. These advantages are more applicable to both industrial and governmental organizations with substantial operations, as well as fuel sellers, who purchase wholesale fuel in order to sell to the end customer.
For these industries, wholesale fuel offers a number of advantages:
With wholesale fuel you can keep a supply onsite, maybe even having the wholesaler deliver the fuel monthly to your storage tank. Keeping a supply at the ready, a company doesn’t have to halt production when equipment runs out of fuel.
Having your own supply is readily available and easily managed before the start of each day in turn increases operational efficiency.
If your delivery vehicles have instant access to fuel, they can minimize route deviations needed to find and stop at fueling stations. They may even need to try multiple stations if their required fuel isn’t available. Minimizing departures from the delivery route gives your fleet an advantage over the competitors.
On-site fuel storage will also allow your operations to run more efficiently, leading to higher fulfillment statistics. Not having to worry about the closest fueling station being closed on evenings, weekends, or holidays reduces logistics complexity immensely if you are functioning on a 24/7 schedule.
Access to the fuel that’s right for you
For many, the stability in wholesale fuel prices allows companies to operate within a more predictable budget. However, fuel is still a fluid market. It is subject to unpredictable environmental events, impromptu tax embargoes, political turmoil, and even the outbreak of war. All these events can impinge on fuel transportation and production, which ultimately affects pricing.
You can stay up to date with a customized daily data feed designed for your specific needs and geographical location, current long- and short-term market opportunities, rack city, and PADD level demands with what some clients have called “the holy grail of metrics” from DTN. Learn more about the information, products, and services available to you.