The third-largest budget item for many U.S. companies is energy, which falls just behind labor and material costs, according to ecova.com. The cost of energy for the U.S. commercial and industrial sectors was more than $202 billion from 2009 to 2011.
As one of the largest expenditures, it is important for employers to find the right combination of energy products by using the best energy supplier for their business needs. And for many, the best energy strategy may involve using petroleum products, bundled with other energy needs.
Petroleum accounts for 3.5 to 4 percent of the total primary energy consumption for commercial business, according to the U.S. Department of Energy. In addition, in 2010, the average price for petroleum — which includes distillate fuel, LPG, kerosene, motor gasoline and residual fuel — was lower than electricity.
“When searching for a energy supplier for petroleum, employers should look for a company with an all-encompassing portfolio of energy offerings, proving reliable, readily available and cost-competitive distillate supply at various supply terminals,” says Paul Rippy, senior marketer for petroleum products at PPL EnergyPlus.
Smart Business spoke with Rippy about which energy suppliers offer petroleum products, how to choose the right energy supplier and the current petroleum short-term market outlook.
Do all energy suppliers offer petroleum products?
No. While there are many energy suppliers that offer various products and services to help you with your energy supply needs, not all suppliers offer a comprehensive choice of energy supply options to help every facet of your business. If your business operates facilities that require different types of energy, it is important to align your business with an energy supplier that can meet all of your needs, whether that is using electricity, natural gas, petroleum products or all three.
When you are looking for a supplier that can be a one-stop shop for energy needs — including electricity, natural gas, petroleum products, renewable energy, demand response and mechanical services — you want to look for an energy supplier that can provide all of these products on a consistent basis. Not all suppliers offer petroleum products consistently or in all the areas where your facilities are located.
What are the advantages of bundling petroleum products with other energy supply products?
Certainly, when you find an energy supplier that is able to bundle various energy products and services to meet your business’s needs, you benefit from the ease and convenience of a one-stop-shop type of relationship. With a single energy supplier capable of meeting all your energy needs you, as an employer, can focus more directly on your other business aspects.
In addition, you may have facilities that are in various locations and have different energy needs. Selecting a supplier that knows how your business works and has committed to understanding your unique energy supply needs is the start of a business relationship that enables your company to have the most advantageous products and services for its energy needs.
What should employers look for when shopping for a petroleum supplier?
Employers should strongly consider the petroleum supplier’s professionalism, experience and ability to provide a diverse, reliable and readily available array of energy products. For example, companies such as PPL EnergyPlus maintain strategically located and limited available terminal capacity space to store products, allowing easy access to their rack customer base. You also want to select a supplier with a strong financial background, knowledge of petroleum and energy markets, and a strong commitment to customer service. And, of course, you want a supplier that can navigate the volatility of the petroleum market and provide your business with competitive prices.
What’s the short-term prospect for petroleum product prices?
As of the middle of May, U.S. gasoline prices were at an average of $3.754, decreasing throughout the beginning of May, according to the U.S. Energy Information Administration. The average in the Mid-Atlantic region was $3.764.
Based on experience and knowledge of the petroleum products market, we believes that distillate product prices will bottom out over the summer months before rising unsteadily into the winter. Gasoline prices will continue to trend downward through the summer into the winter months before trending upward next spring.
This is based on current market and economic data. We don’t have a crystal ball to have certain knowledge of the volatile petroleum market, but we follow the markets closely every day and use that knowledge to benefit customers.
However, the situation always remains in flux; certain events could occur tomorrow that would significantly change the outlook on short-term future petroleum product market prices.
PPL EnergyPlus offers unbranded diesel fuel, gasoline, heating oil and kerosene to electric generation facilities, distributors and large commercial and industrial, and federal, state and local government customers, not only in Pennsylvania but also throughout the Mid-Atlantic region. The Petroleum Products Division continues its strong, well-established supply relationships with refiners, commodity brokers and wholesalers.
Paul Rippy is senior marketer for petroleum products at PPL EnergyPlus. Reach him at (610) 774-5630 or [email protected].
Insights Energy is brought to you by PPL EnergyPlus
