1. The Retail Petroleum Marketplace

2. Retail Fuels Market: Agenda Who sells fuel in America? How do retailers determine price? What influences fuel prices? How profitable is fuel retailing?

3. WHO SELLS FUEL IN AMERICA?

4. Convenience Industry 148,126 stores in the U.S. –120,950 sell fuels 58% are one-store companies Less than 1% owned and operated by integrated oil companies 80% of U.S. fuels sold through c-stores

5. A Small Business Industry

6. Independence is Dominant

7. HOW DO RETAILERS DETERMINE PRICE?

8. Retailers’ Conundrum

9. Fuels Drive Sales, Not Profit

10. Consumers Shop Around 2011-2012 Consumer Survey: –63% shop for fuel by price –66% shop for price by observing prices at the store and while driving –52% of consumers will change their shopping behavior for 3 cents per gallon

11. Consumer Loyalty is Fickle

12. How Do Retailers Set Price? Evaluate competitive market conditions Review historic performance associated with competitive price deltas –Might utilize price optimization software –Direct correlation between gallons sold and in-store sales Consider cost of goods sold and breakeven –What margins are available? –What is the balance between in-store sales lift and fuel margins?

13. WHAT INFLUENCES FUEL PRICES?

14. Prices Follow Seasonal Trends

15. Demand Drives Seasonality

16. Crude Oil Drives Retail Prices

17. Crude Drives Wholesale

18. Retail Follows Wholesale

19. HOW PROFITABLE IS FUEL RETAILING?

20. Retail Margin Volatility

21. Slim Average Mark-Up YearRetail PriceRetail Mark-Up% of Price 2011$3.5118.2 cents5.2% 2010$2.7816.6 cents6.0% 2009$2.3413.1 cents5.6% 2008$3.2518.0 cents5.5% 2007$2.7914.2 cents5.1% 2006$2.5713.8 cents5.4% 2005$2.2714.8 cents6.5% 2004$1.8412.8 cents7.0% 2003$1.5613.2 cents8.5% 2002$1.359.7 cents7.2%

22. Conclusion Retailers set price based upon: –Competition for price sensitive customer Customers shop at 45 mph and will leave for pennies –Store-wide breakeven calculation –Typically make pennies per gallon Cost of Goods Sold: –Changes frequently – several times per day –Does not affect all retailers equally or at same time –Crude oil price is dominant factor in retail price

23. John Eichberger Vice President, Government Relations jeichberger@nacsonline.com (703) 518-4247