The Obstacle Plaguing Market Development: Who’s to Blame?
Fuel dealers tend to know a lot about their customers, but how much do customers know about their dealers? Sharing market toils and opportunities with customers can strategically bridge the upstream and downstream divide.
The phrase “When in Rome, do as the Romans do” refers to the importance of adopting the customs of those who are in a certain place or situation, and behaving like they do. In addition, the phrase “Rome wasn’t built in a day” is an adage attesting to the need for time to create great things. When I hear these two phrases, I think about the impasse at which the petroleum and renewable fuels industries find themselves.
For nearly two decades, I have heard from the downstream marketers of distillate fuels that they are challenged to deliver low-carbon liquid-fuel blends for their customers. They say it’s not their fault, but if not theirs then who’s? The pathway of simply adapting to the traditional way of selling carbon-based fuel is an easy one. There is no need to negotiate differently. And worries about that blended fuel not functioning like good ole fashion diesel fuel or heating oil currently being sold are nonexistent.
Regarding the time it took to build Rome, establishing a low-carbon fuels business can’t possibly be more challenging than building the seat of an empire, can it? It seems like downstream-distribution groups are reluctant toward innovation. Diesel and heating oil have been the longstanding crown jewel for fuel dealers nationwide. Petroleum distillates are loaded with BTUs and challenged by market volatility and fuel-quality nuances, yet no one really appears excited or interested to transition to low- or zero-carbon fuels. Downward pressures on this industry being forcibly promulgated by bureaucrats haven’t been enough to motivate the supply chain to begin the transition to low carbon. Weak demand from the consumer doesn’t help either. They’re neither being educated nor educating themselves, which makes for an easy “let’s wait and see where this all settles out” behavior.
If the past several years have taught us anything, it’s that operating our fuel-distribution businesses in extraordinary and unstable times can feel unbearable. Companies that continue to thrive understand that a customer’s dissatisfaction is equally both a stressor and an opportunity waiting to be explored and exploited. Let me explain.
Have you ever considered sharing with customers the market volatility and stress points encountered to supply them ratably and competitively? If not, why not? Those with whom I have had the privilege to visit about the new frontier of energy marketing have begun to bring their customers into the decision-making processes and have solicited their input on the ever-changing energy landscape. It has helped them improve their respective businesses while increasing customer confidence in the distributor that serves them by creating a collaborative strategy between upstream and downstream.
Walk in the customer’s shoes. Think about their pain points, and not just the escalating fuel costs they face. Think about the legislative drivers forcing them to address market erosion to alternative technologies, which appear to be making evermore ground while the liquid-fuel industry continues to go through the proverbial buy-and-sell playbook. It’s time to be open and honest about the challenges we face and listen attentively to feedback. You may glean valuable pointers to help improve your company that have nothing to do with the current issues of backwardation, supply tightness and environmental pressures to move from carbon to no carbon. It’s clear that we have navigated turbulence since the beginning of time, adapting and succeeding no matter what is thrown at us.
This brings me back to Rome. Why are we going along to get along, and why is it taking so long to tighten our belts and begin that transition to the low-carbon options of biodiesel, renewable diesel and sustainable aviation fuel (SAF)? I don’t pick winners and losers, nor should you. What we should all be doing is talking to our partners about these new fuels, working diligently to integrate whatever systems need to be engineered to equip a terminal, truck or customer location to make certain they’re buying a 21st-century fuel that is built on a liquid foundation.
Electrification, hydrogen and other future fuels are all open for discussion, but readily available biodiesel, renewable diesel and SAF can have a positive impact on the “time value of carbon” now. This means that greenhouse gas (GHG) emissions cut today are worth more than cuts promised tomorrow. Take advantage of this. Share this opportunity to cut GHG emissions today with fleets or stationary generator users of distillate fuel. Educate them that they need not wait until 2030 or 2050 to begin the journey to net zero. It can start today and will have a greater impact on the environment than waiting until tomorrow.
To move from good to great, we need to stop following and become market leaders. So, the next time a call comes in to fill up that 10,000-gallon diesel tank or 275-gallon home heating oil tank, share your challenges with the voice on the other end of the phone.
When you do offer them low-carbon options, they may say, “Just send me the cheapest product you got.” You may have to make several attempts and try different approaches, but don’t get caught up in selling options or thinking that one discussion is going to seal the deal and earn their confidence. The conversation needs to be a continuum. If you don’t share this information and opportunity today, tomorrow is right around the corner. And at some point, it will be too late to tell the story about the transition that never was.
I hope you are up for the challenge. Don’t wait for mandates to save our industry because they’re not in sync with our industry survival timeline. With all this in mind, the only option you, the fuel dealer, should be thinking about is the one that appears most challenging—talking to your customer.
Author: Paul Nazzaro
President, Advanced Fuel Solutions