Hurricane Harvey: HOW DISASTERS AFFECT FUEL PRICES

August 31, 2017

Five most devastating storms in recent US History.

5.  Ivan – 2004

4.  Ike – 2008

3.  Andrew – 1992

2.  Sandy – 2012

1.  Katrina – 2005

As Harvey continues its path of destruction it’s certain to make the list above.  We continue to think of our many customers, friends and vendors that are affected by this horrible storm as it now heads to Louisiana, Arkansas and Tennessee.

Attention IRSI customers:  Insight Retail Software will securely store a copy of your backOffice™ database please let us know.

insightRS_blkblu


This article from NACS online

Higher prices at the pump often lead the public to assume a retailer is price gouging.

 

August 31, 2017

 

​ALEXANDRIA, Va. – The retail fuel marketplace is the most competitive commodity market in the nation. There are an estimated 150,000 retail fueling facilities in the United States. Of these operations, less than 1% are owned and operated by the major oil companies, and about another 4% are owned by a refining company. The majority—about 95% of stores—are owned by independent companies, whether one-store operators or regional chains. Each of these companies has different strategies and strengths in operations, which can dictate the type of fuel that they buy and how they sell it.

Most of the nation’s fuel retailers purchase their gasoline and diesel supplies from a refiner. As such, these businesses have no influence over the wholesale price established by the refiner and, during a catastrophic event such as a hurricane, these retailers can incur extremely volatile wholesale prices and restricted wholesale availability. Wholesale prices are largely influenced by activity in the commodities trading market, in which traders bid prices up or down based upon actual and anticipated changes in supply availability. During disruptive events, these contracts can vary widely in a very short period of time.

Refiners seek to ensure they have sufficient product to satisfy their contractual obligations when supplies are disrupted. Refiners often will place their branded retailers on allocation, restricting their volume to a certain percentage based upon the previous year’s activity and ensuring the refiner’s product is available throughout their service area. While these branded retailers are likely to have at least some supply guaranteed, they have one supplier for product. The unbranded retailer, meanwhile, who relies on the uncontracted gallon of gasoline, often pays an elevated wholesale price or is completely denied access to supplies. This limitation on supplies for the retail segment as demand remains constant results in increased wholesale prices.

It’s common for retailers to operate daily in a volatile wholesale gasoline marketplace, where costs often change several times a day. Under normal market conditions, retailers may seek to adjust their prices upward in response to increasing wholesale prices to pay for their next delivery. This practice is known as factoring in replacement costs and is a critical element in the pricing decision for many retailers, especially during periods of extreme volatility.

But including replacement costs in retail prices may not always be feasible. But because price-sensitive consumers will switch locations to save a few cents per gallon, retailers will often remain competitive in their fuel pricing strategy, which affects their ability to recover the full cost of wholesale price increases, resulting in reduced margins and, in some cases, net losses at the pump for transactions.

Higher prices at the pump often lead the public to assume a retailer is price gouging. Price gouging is defined by some government entities as the increase in prices or value for goods and services that are higher than the prices ordinarily charged for comparable goods and services at or immediately before the time of a state of emergency. In the wake of natural disasters that affect the U.S. transportation infrastructure, governors may declare a state of emergency and institute a price gouging prohibition.

Following Hurricane Katrina in 2005, some members of Congress sought to enact legislation on price gouging that would have punished honest retailers for violating an ambiguous definition of price gouging. The legislation that passed both the House and Senate defined “unconscionably excessive prices” as:

  • Significantly higher than the average price charged by that supplier during the 30-days prior to the emergency;
  • Significantly higher than the competition; and
  • Not attributable to increased costs, including replacement costs.

NACS argued at the time and continues to advise policy makers that the concept of price gouging is very complicated and must be carefully considered. Laws that do not adequately protect the normal operating practices of fuel retailers can have a very damaging effect on the market. Retailers must be given the opportunity to respond to changing market conditions and to recover their costs. For example, laws that prohibit a retailer from increasing fuel prices following the declaration of an emergency yet provide no allowance to adjust prices in response to escalating wholesale prices serve only to penalize retailers who stay open for business to serve their communities and accelerate the exhaustion of already limited supplies.

While Congress did not ultimately enact price-gouging legislation, several states that experience hurricanes and flooding have price-gouging statutes:

Texas
The Office of the Attorney General has authority to prosecute any business that engages in price gouging after a disaster has been declared by the governor. §17.46(b) of the Texas Deceptive Trade Practices-Consumer Protection Act provides that it is a false, misleading or deceptive act or practice to take advantage of a disaster declared by the Governor under Chapter 418, Government Code, by:

  • Selling or leasing fuel, food, medicine or another necessity at an exorbitant or excessive price; or
  • Demanding an exorbitant or excessive price in connection with the sale or lease of fuel, food, medicine or another necessity.

Louisiana
Once a state of emergency is declared, the price gouging ban is effective during the period specified in the declaration and for an additional period not to exceed 30 days after the declared state of emergency ends, unless expressly extended by the governor (La. R.S. 29:732(B)). Louisiana’s price gouging statute is not to freeze prices. Wholesalers and retailers may increase prices as long as the increase in price charged by the seller is attributable to regional or national market trends and fluctuations, or to reasonable expenses and charges for a business’ risk incurred in obtaining or selling the goods or services during the state of emergency (La. R.S. 29:732(A)).

The state’s price gouging ban covers goods and services necessary for use as a direct result of the state of emergency, such as gasoline or diesel fuel of any grade, hotels, motels and generators.

Florida
According to the Office of the Attorney General, Florida Statute 501.160 states that during a state of emergency, it is unlawful to sell, lease, offer to sell, or offer for lease essential commodities for an amount that grossly exceeds the average price for that commodity during the 30 days before the declaration of the state of emergency, unless the seller can justify the price by showing increases in its prices or market trends. Examples of necessary commodities are food, ice, gas and lumber.

The law compares the reported price of the commodity or service during the state of emergency to the average price charged over the 30-day period prior to the declared state of emergency. If there is a “gross disparity” between the prior price and the current charge, it is considered price gouging.

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Just for fun – take a minute to stop and smile!

March 14, 2017

Sometimes it’s nice to step away from EMV and Blizzards and all things political to just smile.  Perhaps have a Coke and a smile.  This guy turned 11 yesterday and is in our circle of family operated business.  He’s the smartest and kindest kid I know.

 

Happy 11th to Evan Phillips.

I want to be like you when I grow up.

evan


ONE YEAR LATER: CHIP WITHOUT PIN

October 3, 2016

Since the October 2015 liability shift, EMV remains frustrating for retailers and confusing for consumers—not a good proposition leading up to the next liability shift in October 2017.

October 3, 2016

ALEXANDRIA, Va. – One year after the October 2015 liability shift took effect for retailers to accept Europay MasterCard Visa (EMV) chip cards inside the store, thousands of chip readers have yet to be activated. To make matters more frustrating, the next liability shift—for fuels dispensers—is one year away.

Convenience retailer investments in EMV are not preventing fraud because chip cards in the U.S. are not enabled for PIN authentication, which is the most effective way to combat fraud, ensuring the customer using the card is the owner of that card. In the United States, the convenience store industry processes 160 million transactions each day and invests billions to reduce fraud at the point of sale. For example, many retailers pay to use customers’ ZIP codes to verify a transaction to protect their customers and their business. Retailers have real incentives to eliminate payment card fraud because they, according to the Kansas City Federal Reserve, absorb 80% to 90% of all fraud losses on credit and debit card transactions.

Convenience retailers will spend more than $7 billion on EMV—or just under 70% of industry pre-tax income for 2015—to upgrade and replace software and equipment to accept chip cards, but the card companies prevent retailers from requiring the use of PINs to verify the cardholder and protect against fraud. Without the protection of a PIN number on transactions, consumers and retailers are vulnerable to fraud.

Leading up to the October 2015 deadline, the card networks were late providing the necessary software specifications to accept EMV transactions. Retailers then needed certification from each card network before they could activate EMV. There were bottlenecks for both, compounded by the fact that the card networks set a liability shift timeframe without regard to the ability of equipment manufacturers and software providers to actually meet the deadline—a problem that will undoubtedly turn out to be even worse at fuel dispensers.

Nearly a year ago, NACS Board member Jared Scheeler, managing director of The Hub Convenience Stores Inc., testified before Congress that his chain of four North Dakota convenience stores had spent roughly $134,500 to install POS and pump card readers that accept EMV chip transactions. At that time, NACS estimated that the average transition cost would be more than $26,000 per store, compared with an average profit of $47,000 per year.

Since the October 2015 EMV liability shift, many retailers have also been experiencing an outrageous increase in chargebacks, mostly erroneous. Counterfeit chargeback liability is unknown, and has not been divulged by Visa and MasterCard, despite industry efforts for clarification.

Last week the Merchant Advisory Group (MAG) sent a letter to Visa and MasterCard regarding ongoing challenges with the EMV transition for in-store deployments, and highlighted concerns regarding the feasibility of the payments industry being ready for the October 1, 2017, liability shift for fuel dispensers.

“Compounding the financial burden for small merchants is the liability shift already in place for in-store EMV transactions under which chargebacks have far exceeded expectations. And for larger retailers with many stores and multiple pumps at each location, the expense is staggering,” MAG wrote in the letter.

The NACS Show is just two weeks away, so if you want to learn everything you can about EMV, its hurdles and how to prepare for the next October 2017 liability shift, do not miss out on the education, guidance and discussions that will take place during the event.

Here’s how you can maximize your time at the NACS Show learning more about EMV:

  1. Participate in Technology Edge.
  2. Attend EMV-focused education sessions, such as “Are You Prepared for EMV?”
  3. Meet with vendors at the expo.
  4. Talk to members of Conexxus and industry experts at the Technology Edge Solutions Center.
  5. Talk to NACS government relations staff and general counsel in the NACSPAC Lounge.

On Capitol Hill, most of the efforts have so far focused on the aftermath of a data breach and notification requirements. NACS is urging policymakers to consider not only what happens after a data breach occurs, but also how to prevent breaches and fraud from happening in the first place. Protecting against fraud should be a top priority for all forms of payment, including mobile payments, and the best way to authenticate transactions is through a PIN or more advanced means.

NACS is advocating that retailers should have the option to require PIN on credit and debit card transactions and those that occur on a mobile device—the same protection banks require at ATMs.

PIN is the most secure authentication technology currently available and can be implemented now. All EMV chip-card readers are PIN-enabled with encryption security. When PIN is required, whether a card number or the card itself is stolen, a PIN protects consumers against fraud.

http://www.nacsonline.com/Media/Daily/Pages/ND1003161.aspx#.V_KCGvArK70

 


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