By Ryan Mossman, Contributing Editor
The National Hurricane Center predicted an “above average” hurricane season for 2013, forecasting eighteen tropical storms and nine hurricanes. But the reality is that 2013 has been a dud with nine tropical storms and only two Category 1 strength-named hurricanes. Though hurricane season doesn’t officially end until November 30, roughly 75% of all major hurricanes occur during the months of August and September—so odds are we have clear skies ahead. This is good news for everyone, but especially for fuel retailers and suppliers, which are often most affected by hurricanes. However, just because the odds are with us, doesn’t mean we shouldn’t be prepared.
As evidenced by Hurricane Sandy last year, a hurricane can cause catastrophic damage to property and infrastructure, and wreak havoc on the retail fuel network. Even before Sandy came ashore last year, demand for fuel in the Mid-Atlantic and New England region escalated quickly as residents rushed to fill up their gas tanks, causing fuel stations to run out of product throughout the area.
In addition to this sharp increase in demand, highway closures exasperated the situation, as last minute fuel shipments were unable to be delivered to their intended fuel stations desperately in need of them. After the storm, supply issues worsened due to storm-inflicted power disruptions at the refineries, terminals, and pipelines. While some fuel deliveries made it through the mess, the lack of electricity at retail stations prevented the fuel to be pumped into consumers’ vehicles. Additionally, flooding at some convenience store locations contaminated the fuel tanks, which rendered the product unusable.
Some of these fuel supply problems lingered well after Hurricane Sandy, with 28% of gas stations in the region either out of fuel or unable to pump product a full week after the storm had passed. Hurricanes and other severe weather events can wreak havoc on replenishment plans and fuel operations. However, a little advanced planning and communication can mitigate the negative impacts of these storms. As fuel suppliers and distributors reach the end of this year’s hurricane season, it is important to not only stay vigilant but also take a moment to review and update disaster preparedness plans. When planning, consider these five helpful tips:
Ben Franklin wisely said, “By failing to prepare, you are preparing to fail”. Suppliers should take these words to heart as a little advanced preparation can ensure their success during and after the storm. Prior to the storm, retailers will want to top off tanks to reduce fuel run outs so suppliers should be prepared for the quick increase in demand. Additionally, most retailers will abandon “just in time” strategies at stations and raise inventories prior to a storm. As much as possible, suppliers will want to anticipate these spikes in demand and try to stay ahead of them. If retailers have not reached out to you, you may consider reaching out to them in preparation. Keeping the lines of communication open with your contracted retailers will help to keep them operational and stocked with fuel while strengthening your relationship with them.
Lead by Example: Examine your power needs and check back-up generators (if you have them) to make sure that they are ready in the case of a power outage. If you don’t have generators you should invest in some. During weather-related events, retailers will be contacting you, so it’s doubly important to make sure that infrastructure needs are met. As witnessed with Hurricane Sandy, power disruptions at any point in the supply chain will bring the system to a grinding halt. With this preparation, suppliers might even be available to help save the day for a non-contracted retailer desperately in need of fuel to keep its location operational.
2. Listen and Communicate
Be proactive in aiding your retailers: Establish a good communication network with local government and emergency management officials. Keeping the lines of communication open with your contracted retailers will help to keep them operational and stocked with fuel while strengthening your relationship with them.
Understand what officials say, and what it means to your business. If officials recommend consumers fill their gas tanks, this could mean a run on fuel with possible shortages for locations along access routes in your area.
When possible, pre-plan for fuel emergency preparedness in coordination with your internal teams and carriers. Aspects of your plan should include communications, up-to-date information about traffic, flooding, and the demand of retailers in your area.
3. Control Contamination, Protect Equipment
Flooding causes many problems including equipment failure and product contamination. Wetstock analytics can identify faulty equipment and water contamination, before they become a problem, preventing costly fines. Fuel suppliers will need to be doubly vigilant in this area to ensure that all product delivered to customers is without contamination.
Take this opportunity to strengthen your relationships with your partners by helping them remain compliant with state anti-gouging laws. Be especially sensitive and careful of the prices for products during this time. By doing so, you will help protect your customers from fines and scrutiny by ensuring that prices are accurate and not inflated.
Retailers whose prices are significantly higher than the competition could lose customers during this time, and it makes good business sense for suppliers to help in this regard.
The technology to help you is available; For fuel jobbers and suppliers that optimize inventories, delivery schedules, and pricing with fuel management solutions, most dashboards will offer multiple opportunities to adjust to potential runs on supply, disruptions and demand spikes. The continuous overlay of near real-time fuel information on solutions built around industry best practices enable suppliers to stay on top of any rapidly changing situation.
Hurricanes and other severe weather events only occur a few times a year, but as Hurricane Sandy showed us in dramatic fashion, they can be absolutely crippling to fuel retailers. During this time, fuel suppliers and carriers are the critical lifelines for these retailers, ultimately determining if they can remain operational for their communities. Although the industry may have dodged a bullet this hurricane season, it is much better to prepare for these situations rather than be caught off guard. Preparedness and communication are the keys to maintaining strong relationships and helping retailers keep fuel in their tanks both before and after the storm.
About the Author
Ryan Mossman is the vice president and general manager of FuelQuest’s Fuel Services.