"The retail fuels market is a complex system that is influenced
by a wide number of factors. The best strategy for providing
long-term relief and stability to consumers is to enact a
comprehensive transportation energy policy," National Association of
Convenience Stores (NACS) Vice President of Government
Relations, John Eichberger, told Congress in testimony on March
Eichberger was one of seven experts asked to testify before the
House Energy and Commerces Subcommittee on Energy in the
hearing, "The American Energy Initiative: A Focus on Rising Gas
"NACS does not believe that improved efficiency, enhanced sustainability, national energy
security and economic growth are mutually exclusive objectives.
But if they are not pursued in a strategic, coordinated effort,
they can lead to unintended consequences that can derail
progress towards all of the objectives, and, in the end,
consumers will endure the brunt through higher prices at the
pump. Enhancing supplies of traditional energy resources while
conducting an orderly transition to alternatives is the best
way to benefit consumers," said Eichberger.
Eichberger also explained the how fuel retailers operate,
noting that they set prices based upon two factors: competition
and cost. "It is quite literally a street fight. We post our
prices at 20-foot signs on the side of the road and empower
consumers to shop for the best value at 45 mph. In a survey
this year, we found that 40% of customers will drive five
minutes out of their way to save three cents per gallon."
"For the retailer, this means that they must post a price that
is extremely competitive in their market," said Eichberger.
"But we have to pay close attention to our costs as well. In
2011, on average it cost a retailer about 17 cents to sell a
gallon of fuel. In 2011, the average gross margin was only 18.2
cents, so the average profit per gallon was about 1 to 2
So what can be done to help the consumer?
"Unfortunately, there is very little retailers can do, other
than to compete," he said. "Our gross margins so far this year
are averaging 3.6%. There is not a lot of room for maneuvering,
but retailers are doing what they can to offer their customers
the best deal possible. Many are offering discounts to
customers through a variety of programs. Retailers are doing
what they can to attract the price-sensitive consumer, but they
are limited in what they can do."
Eichberger suggested that Congress should consider a few things
to address current concerns over high gasoline prices:
Increase future supplies of oil. The US will never replace
Saudi Arabia in terms of oil production, but a commitment to
increased production of domestic oil resources will send a
signal to the market and will likely help mitigate the
inflationary effect of speculative investment.
Evaluate costs of regulations. Every regulation will impose
costs on the system, and those costs will be passed through to
the consumer. Congress and the administration have to make
decisions about what they believe is in the best interest of
the country, but they need to be aware that the ultimate payer
for all regulations is the consumer.
Harmonize fuel regulations. The current CAFE proposal will
render the Renewable Fuels Standard impossible. Using modest
CAFE projections, the two policies will
combine in 2022 to require 37% renewable fuels in every gallon
This will cost the retail market at least $22 billion in
equipment upgrades. Meanwhile, it is projected that only 15% of the
vehicle fleet will be able to run on the fuel.
"I am not saying that either policy is bad, but I am pointing out
that when we do not pursue a comprehensive fuels policy, we end up establishing
programs that contradict one another and impose unintended
consequences on the market," stressed Eichberger.