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Membranes, Molecules and the Science of Permeation |
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Impact on retail operating margins |
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| The evaporation loss translates directly into a reduced gross margin. If a retailer pays for product delivered by tanker-truck, and if the retailer is not able to resell the same volume of product that they paid for, the impact on operating efficiencies is higher than one might expect.
For example, consider a typical station pumping two million gallons per year. Assume the station has a pump selling price of $1.20 per gallon and a cost of $1.00 per gallon (wholesale + delivery + taxes). How much additional gasoline must the station sell to recoup the loss in contribution margin due to evaporation of 0.35 percent of throughput? Consider a station with a pump price of $1.10 per gallon, or a pump price of $1.05 per gallon. (Assume the evaporation rate, annual throughput and the cost per gallon are the same as above). One can show that the following relationship applies to speed up this calculation: |
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For the first case with a pump selling price of $1.20 per gallon, the increased volume required is 41,000 gallons. For the second case, with a selling price of $1.10 per gallon, the increased volume required is 75,000 gallons. As the selling price, throughput and evaporation rate increase and as the margin decreases, the make-up volume figures are magnified considerably. These increased volumes increase selling, and general and administrative expenses. This, in turn, reduces profitability. Profits are further reduced by taxes paid on wholesale product, which cannot be recouped at the retail level. |
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Economic viability |
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| The technologies of the past might have been technically feasible to reduce storage tank evaporative losses, but the economic viability was not attractive. Now, with novel membrane technology, both technical and economic benefits are possible. Evaporative losses and inventory shrinkage were always assumed to be "part of doing business" in the petroleum industry. It does not have to be that way anymore. Even before considering the internal or external value of trading emission reduction credits, the savings in salable gasoline inventory with the membrane system yield financial returns up to 40 percent per year.
The challenges of producing cleaner fuels and limiting evaporative emissions present tremendous opportunities for visionary suppliers. The successful petroleum marketers of the new millennium will use their technological leadership to differentiate their product or service offering in the fiercely competitive downstream refueling segment. Consumers have a choice of where to refuel their automobiles. Ordinary people can take pride in doing their part to minimize atmospheric emissions by filling up at a station using environmentally friendly technology. By using advanced recovery technologies like PERMEATOR, suppliers can realize their environmental stewardship objectives and generate significant shareholder value at the same time. |
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