MJG Gas Station Specialists LLC

REPORTS

Jul. 13, 2018

The average retail cap rate for single-tenant net lease (STNL) propertiesduring the second quarter of 2018 reached 6.2 percent, an increase of 10 basis points from first quarter.  The last time the rate increased that much was in the second quarter of 2011. In addition,  the number of retail properties listed has increased, as sellers look to sell assets before cap rates increase (prices decrease) further. The number rose by more than 13.6 percent, to 4,216 properties nationally. Deal flow has slowed. Quarter-over-quarter, single-tenant retail sales volume was down about 14 percent in the first three months of 2018, while year-over-year volume decreased nearly 26 percent.

“As second quarter closes, preliminary numbers indicate that STNL retail sales volume for the first half of 2018 may show a decline vs. H1-17 totals, although the market is still seeing billions of dollars of real estate trade hands.  H1-18 transaction were led by dollar stores and drugstores as the most often-traded asset types, a trend expected to continue in the near future.

The impact of e-commerce on bricks-and-mortar retail has led investors to focus on STNL retail properties that have demonstrated or expected resistance to “e-commerce competition - these include medical facilities, fitness centers, restaurants, grocery stores, entertainment venues and (last but not least) convenience stores, 

Q2-18 are up about 10 bps, but rates on any particular transaction are going to vary depending on the terms of the lease, the location of the property, the creditworthiness of the tenant and the size of the asset - there are a lot of variables to consider.

From an investment standpoint, there’s still strong demand from private investors motivated by ease of operations and stable cash flows. Gas stations/c-stores are seen as a higher risk asset type, primarily we believe because of the environmental risk associated with the fuel tanks. While the environmental risk is present, it's been largely mitigated over the past 20 years by EPA regulations, equipment improvement, and contractual language in the lease protection both the real estate owners/investors, and the lenders.  This singular consideration has proven to be a notable barrier for both speciality net leasing brokers and investors.  To compensate investors for this risk, STNL gas station properties command about 50-75 bps of cap rate vs. traditional STNL retail properties (all else being equal, which it hardly ever is).

The new federal tax law that went into effect in December 2017 will impact STNL properties.  Since this is a relatively new consideration, it will take some time to see the full impact of the tax rule changes. Add tax risk to your due diligence risk. Ultimately, this too will be baked into the transactions. 


Dec. 16, 2015

Well, it finally happened.  After 9 years since the last interest rate hike, and nearly a year in anticipation, the Federal Reserve (Fed) finally raised it's Fed Funds rate by 1/4%, from 1/4% to 1/2%.  After driving rates to essentially zero in Q4-08, they've taken the first step to alleviating financial repression and artificially disrupting the fair market value of money. To echo the popular consensus, the basis for the rise after engineering about 7 years of a muddling-along economy, is that the economy has sufficiently recovered to absorb the rise and continue the momentum to further economic progress without monetary stimulation. Although acting in anticipation of actually seeing a 2% inflation rate (a stated requirement for the increase), economic data is said to be sufficiently visible to support the increase at this time.  Also, employment data (spun or otherwise) has shown to have created sufficient jobs and reduced unemployment to calculate to the mystical 5.0% goal, which today is considered "full employment".  Continuing incremental increases in the rate are expected on a "data dependent" basis, i.e., as long as the economy continues to improve, rates will be "inched along" toward normalization.

Observations & Analysis:

Almost universally within the CRE industry, the experts are heralding the move as appropriate, expected, and of no immediate consequence to a disruption within the industry.  While CRE cap rates are low, there is sufficient spread between these and conventional market investments to absorb this increase, and possibly additional raises.  There is also an abundance of investment capital available to support any price slides that may be in the offing. Additionally, an already strong dollar will be further enhanced by the increase, thus attracting still more foreign currency into the U.S. markets. While rents typically increase with rising interest rates, the pronouncement of a strong and expanding economy is seen to be more helpful to increasing rental demand for space, even with potential rent increases. Although the Fed raised the Fed Funds rate and this will raise in sympathy other short-to intermediate rates, CRE industry experts expect the long end of the yield curve to have no effect. (Hum-m-m ... if short term rates increase and long term rates stay unchanged, this begins to invert the yield curve.  Inverted yield curves traditionally have forecasted recessions!)

Public securities markets, primarily the stock and bond markets, have been elevated beyond economic justification by the excess liquidity provided by the Fed for the last 7 years.  To suggest they are a bubble is a gross understatement.  It's widely anticipated these bubbles will burst - correct valuations; the only uncertainty is when.  Until they do (or the hold together long enough for the economy to improve sufficiently to support current values - unlikely, but possible) they'll likely continue to exhibit the volatility we've seen for the last (several) year or so.  (Gas station note:  the bubble pricing in the stock market where a share represents ownership in the underlying company has not transitioned to privately held companies.  That is, the multiples that gas station businesses with specific markets in AZ sold at prior to 2007-08 has not changed notably over this period.  The change in pricing is largely due to increases in the real estate.) 

To all this, we at MJG are skeptical. The data dependence the Fed glows over has been spun to a point past disingenuous. Globally, many if not most of the G-20 nations are in some state of recession and/or deflation, and the U.S. will not - cannot - decouple from the world.  We believe there's better than a 50/50 chance that the U.S. will be in a recession in 2016. (Recession-calling being what it is, it's likely to be 6-9 months after we actually enter a recession until it's called ... by many measures we're already in one!) The last thing you want to do in a recession, or economic downturn by any other name, is raise interest rates.  If the economy stalls (which it was already doing prior to this increase) the Fed, if it has an ounce of integrity, will have to back-peddle and loosen again.  This doesn't mean a reduction of the rate they just increased, although they may, they may instead choose some other method of monetary accommodation, e.g., the next QE program. 

At any rate (pun intended), what passes for public consumption and advertised by industry experts may contain just a tad of self-servitude.


Oct. 29, 2014


A word about interest rates.  Popular and now conventional thinking is that the Fed will begin raising rates in Q2-15. (Some so confident/arrogant as to be forecasting the month!) We're not so sure.  Fed policy on the matter as stated by Janet Yellen is couched firmly in the employment data.  If the economy is not creating jobs and raising the real (not nominal) income level, she'll be hard-pressed to raise rates. In fact, now that the last QE program is officially terminated and that liquidity is removed from the market, the economy is more dependent on the "free economy".  In reality, the QE look-a-like programs rolling out from the EU and Japan are flowing benefits in the U.S. as capital in-flows.  When this spigot turns off, and it will, we'll look a lot like the EU and Japan today.  At that point, you might expect a re-introduction of then another QE effort ... and there we'll go again.  When you may ask?  We don't know, but some respected folks in the field suggest perhaps as early as a year or so from now ... it depends. 


May 17, 2014  (The following report is excerpted from the Spring 2014 Blue Paper, an MJG publication.)


What's my business worth?  Continuing as one of the top 3 or 4 questions that comes up in our discussions with both sellers and buyers is the value of the business, generally including the real estate.  Some helpful comments here addressing that question come indirectly from our friends at American Business Appraisers (ABA) via their May 2014 Newsletter, KC Conrad owner and appraiser.  (Space doesn't permit listing all of his credentials and qualifications.  You can check them out at www.ABAvalue.com .)


It's important to recognize that if you're selling a gas station/c-store business that includes the real estate as an asset, the real estate is valued separately, and differently, from the business.  The basis for this is that you don't need to own the real estate to be in the gas station business; you could lease the real estate, thus committing far less capital to the investment.


The severe decline today in the business values is driven primarily by a decline in any, or all, of the financial metrics used with multipliers, percentages, etc. to derive the value.  For instance, if you priced your business at 2.58 times (actual national average) the EBIDTA (you might also use adjusted cash flow or seller's discretionary earnings) when you bought it in, say 2008, and the EBIDTA was $300,000, you paid $774,000 for the business.  If today your business has eroded to where your EBITDA is $200,000, that same multiple may apply, but the value would calculate to $516,000.  The thief here isn't the multiple, but the decline in the business performance.  In fact, data from ABA shows that today for businesses valued at less than $1,000,000 the multiple of EBITDA is 2.25 times. The differential between 2.58 and 2.25, or .33, represents a loss in value fo $33,000 for every $100,000 of EBITDA.


The other, and perhaps more meaningful fly in the ointment is:  the value of real estate.  This is where most value has been lost since the 2008-2009 economic decline.  Nationally for all segments of CRE, values bottomed about 2009 with CRE industry-wide losses in value of 40-45%  depending on market segment, geographic location, quality of the property, etc. This would include gas station and c-store properties.  The dynamics of CRE value recovery is more complex that envisioning a recovery of your business as a function of improved sales and profits.  The basic relationship, however, is that the value of CRE is determined primarily by the net income it produces.  For investor/landlords, their bottom line that they capitalize (cap rate) is the rent they collect less their operating expenses, termed net operating income or NOI.  If you own the real estate where your business operates, the most direct influence you can have in increasing the value of your property is to increase your bottom line, or more properly EBIDTA or seller's discretionary earnings.

NEWS








July 16, 2018


NATIONAL JOB AND WAGE GROWTH

The National job and wage growth slowed in June, however Arizona and Phoenix remained at the top of the charts in terms of wage growth, according to Paychex’s monthly IHS Markit Small Business Employment Watch report.

The payroll-services provider reported a 4.55 percent growth of hourly earnings in Arizona and a 5.07 percent growth of wages in Phoenix. The report provided information for wages in the 20 largest U.S. metro areas based on population.

Across the U.S., the South remains the top region for employment growth but the West remains the top region for wage growth, according to the company.

Care to talk? Give us a call.

Call or email for more details: 
Mike Green 
623-931-5086
mike@mjgspecialistsaz.com

#MJG #GasStationSpecialistsAZ #Arizona #wagegrowth #employmentreport #CommercialBrokerage #RealEstateAZ








July 13, 2018


What’s a Blue Paper?

The Fed has its beige paper. Numerous research firms, professors at universities, and think tanks produce white papers. At MJG we publish a Blue Paper. It accomplishes much the same thing – what’s in a color! I imagine somewhere, trying to find it’s footing in the market is a pink paper. We’ll stick with Blue.

Our Blue Paper is a periodical report published un-periodically (!) typically 2-3 times/year as opportunity and material dictate. Blue Papers are typically strategic in content, not so much day-to-day blow-by-blow events, although current events often form the impetus for the articles.

These are not distributed by social media, but are emailed directly to interested readers compliments of MJG. If you would like to receive a trial issue, send your request directly to me at Mike@MJGSpecialistsAZ.com . Besides your name and email address, include your company, your position at the company, your phone number, and the industry.







July 11, 2018


Introduction to MJG Gas Station Specialists LLC


MJG Gas Station Specialists is a commercial real estate (CRE) and business

brokerage firm specializing in gas station properties & businesses in AZ.
Transportation fuels, specifically gasoline (gas) and diesel, are unique products

sold through these facilities that differentiates these businesses and properties

from their retail counterparts. Crude oil that is the feedstock for transport fuels is

a global commodity, and affected by geo-global events – nothing new here. Oil,

particularly in the middle-east and among OPEC countries, is a major contributor

to their national GDPs. Also, it’s well-known that CRE and usually business acquisitions,

mergers & divestitures, re-fi’s, LBOs, etc. utilize financial leverage (debt) in their financial structures.

Consequently an eye toward the credit markets, liquidity, capital flows and factors affecting it, play into

our research and day-to-awareness. All this goes toward bringing our clients the most comprehensive array

of considerations available for gas station capital services.
With this background it should become apparent why the content of our media

may often not seem to belong within the context of commercial real estate and business brokerage.

Let me assure you, it all matters.









July 6, 2018


IMPORT/EXPORT: TARIFF


China has been a major U.S. oil importer since 2015 when then-President Obama lifted a 40-year ban on exports to China. China most recently imports about 18 million barrels (bbls) of oil a month.

In attempting to level the foreign trade playing field, President Trump’s new tariffs threaten to put this volume back into the global market … increasing supply. This will surely be picked up by another country, but in the process, especially over time, can be expected to put downward pressure on prices. China's plans to levy 25% tariffs on $50 billion worth of US goods in retaliation for President Donald Trump's own tariffs on Chinese products.

This all at a time when OPEC has announced their own curbing of production. This all plays out as price volatility to the dealers (and upstream as well), Carried out far enough and overall global economic growth will be threatened.

Then what? Stay tuned.






July 4, 2018


"EXPERT" DESIGNATION BY BUSINESS BROKERAGE PRESS

I’m pleased and proud to announce that I have been approved by Business Brokerage Press(www.BBPInc.com) as a BBP Industry Expert
for the Gas Station & Convenience Store industry. This is my 11th year of being acknowledged by BBP as an industry Expert, and awarded with this designation.

BBP publishes the annual Business Reference Guide that serves the business brokerage industry as a desktop reference resource for business brokers.

As an acknowledged Expert, this year’s Guide will include my data and comment on the gas station and c-store industry. The publishing will include my name, industry specialization(s), company name (MJG), and contact information. I will also be included in BBP’s listing of Industry Experts on their website (www.industryexpert.net ).


June 18, 2018


China's plans to levy 25% tariffs on $50 billion worth of US goods in retaliation for President Donald Trump's own tariffs on Chinese products threatens to restrict US energy exports to the Asian nation, putting at risk 18.4 million barrels of American crude and oil products.  So all of a sudden the market has more oil available than it did prior to Trump's inking the tariffs. The oil has to go somewhere, so expect this increased supply to pressure price declines.  And this while we're setting production records for U.S. oil production.  However, the increased oil production is having trouble getting to market due to infrastructure from the wellhead to the refineries.  Production is also waffling under pressure of insufficient labor available, even with improved technology.  Might this combination of factors choke off the economic expansion?  The tariffs alone threaten economic growth in China.  By the time this singular act winds its way through the global economies (globalization) no one will be unscathed. 


Our economies (G20s anyway) are being further constrained by the rising tide of interest rates.   Globalization strikes again.  Just like the other G20 nations followed the Fed (U.S. central bank) in Quantitative Easing, so also are they following in attempting to "normalize" their balance sheets, e.g., Quantitative Tighting and raising of their respective national rates.


This being the recovery from Bernanke's great experiment, we're all plowing new ground here.  Making history sometimes ain't all it's cracked up to be!


May 11, 2018

Reduced unemployment is on a terror.  The main media broadcast number for April was 3.9%, the new lowest level since 2000.  The man-in-the-street consumer who drinks this Cool Aid is feeling financially secure, and expressing this feeling in his spending-savings activities, which shows up in consumer confidence indices. Behind the curtain, however, the truer number (U-6) is was 7.8%.

Still, all-in-all, the economy is vibrant and the outlook is optimistic.  GDP has averaged 2.9% over the last 4 quarters, including a dip to 2.3% in Q1-18.  This bodes well for our buyer population. This is verified by the number of Hits recorded in BizBuySell – a generally higher level of activity than, say, a year ago.  Loopnet stats are not as reactive for businesses for sale since this is primarily a CRE listing website. The percent of Views/Hits, however, remains somewhat sluggish, indicating that while buyers are looking, they are still cautious in stepping up.  This also is good, and suggestive we won’t have a hot market soon, the results of which tend to be a blow-off and crash.

The Fed left interest rates (the Fed Funds rate) unchanged in April – this was expected.  Progressively increasing inflation (gauged the way the Fed sees it) increases the likelihood of a rate increase in June.  Barring a change in trends (unemployment and inflation), we appear to be on track to get additional increases in Sept and Dec. Rising interest rates left this year could total .75%.  Tacked onto the current 4.75% prime, this forecasts an SBA 7(a) rate in the area of 7.5% for the average borrower.  This is going to put pressure on debt service coverage coming from your historical income statements, and this at a time when your SDE is absorbing the last 2 years of minimum wage increases, and the effects of higher oil prices at the pump.  This being the case, be prepared to carry a secondary note to fill the gap on offers coming in for the balance of the year.  (Call me if you want discussion or clarification of this.)

Our own crystal ball suggests that raising rates as expected is likely to chock off the expansion before the Fed is able to get all the increases in.  The powers-that-be will want to delay calling any slowdown a recession until after the 2018 mid-term election, but we may be feeling this effect before we have our Christmas shopping done.  If President Trump’s rally in Elkhart IN last night (5-10) is any indication, he’ll have Repubs on fire going into early Nov.  A successful Republican outcome to the congressional races could re-energize the economy well into 2019.

All-in-all it looks like we’ll have a good selling environment for the rest of 2018.


We have no expectation to share about the up-coming summit with Kim Jung Un in Singapore next month.  Making history, however, is sometimes not all it’s cracked up to be!  


Dec. 13, 2017

As widely expected, the Federal Open Market Committee (FOMC) raised the Fed Funds rate today to a 1.25-1.50% target range. (Prime rate is now 4.5%.)

This is the 3rd hike in 2017, and the 5th since the end of 2015. Post-meeting forward guidance reiterated the forecast of 3 more raises in 2018 - anticipated to be 1/4 point each. Also raised was the Fed's 2018 GDP estimate from 2.1% to 2.5%.  Nov. PCE (the Fed's inflation gauge.) came in at 1.4%,  a low point trending down since the first of the year - the self-proscribed inflation target remains unattained. Unemployment is expected to fall below 4% in both 2018 and 2019. Wages, however, have hovered just over inflation for the last 2 decades! None of the forecasts factor in any results from the newly passed tax reform legislation.

Comment

It's been widely discussed for years that the Fed's model, the now-infamous Phillip's Curve, is outdated and empirically shown by Milton Friedman to be unreliable.  Yet the Fed persists in calling the monetary shots based upon relevant Curve data. Raising the Fed Funds rate most directly affects the short end of the yield curve, raising short term rates out to abut 3-5 years. Raising GDP forecasts and lowering unemployment expectations, however, affects the long end of the curve driving those rates higher also. Both of these have the affect of strengthening the dollar, making exports less competitive.  It's been thought for several years that the Fed was behind the rate curve in raising rates as the economy went through it's lethargic recovery since 2009-2010.  This late in the economic cycle, it's now discussed with some concern that the Fed is raising rates so as to be able to reduce rates once the imminent recession is upon us. The concern is that raising rates at this time will in fact catalyze the recession it hopes to mitigate!  It appears the Fed is more interested in fixing a recession it may in fact be helping to cause, than to prevent it in the first place!  The newly-passed tax reform package signed by President Trump in late December will undoubtedly have an impact on monetary policy and the behavior of the economy, but the timing and magnitude remains to be seen. 


June 3, 2016


We're pleased and proud to announce that Michael Green has been approved byBusiness Brokerage Press  (www.BBPInc.com) as a BBP Industry Expert for the Gas Station & Convenience Store industry.


This is Mike's 10th consecutive year of being acknowledged by BBP as an industry Expert, and awarded with this designation.

BBP publishes the annual Business Reference Guide that serves the business brokerage industry as a desktop reference resource for business brokers.  As an acknowledged Expert, this year’s Guide will include Mike's data and comment on the gas station and c-store industry. The publishing will include his name, industry specialization(s), company name (MJG), and contact information. Mike will also be included in BBP’s listing of Industry Experts on their website (www.IndustryExpert.net)

Michael readily acknowledges that he could not have arrived at this position without you, his associates, clients, and prospective clients who have supported him and MJG, and allowed him to develop his skills and talents in his profession.


Dec. 16, 2015


Well, it finally happened.  After 9 years since the last interest rate hike, and nearly a year in anticipation, the Federal Reserve (Fed) finally raised it's Fed Funds rate by 1/4%, from 1/4% to 1/2%.  After driving rates to essentially zero in Q4-08, they've taken the first step to alleviating financial repression and artificially disrupting the fair market value of money. To echo the popular consensus, the basis for the rise after engineering about 7 years of a muddling-along economy, is that the economy has sufficiently recovered to absorb the rise and continue the momentum to further economic progress without monetary stimulation. Although acting in anticipation of actually seeing a 2% inflation rate (a stated requirement for the increase), economic data is said to be sufficiently visible to support the increase at this time.  Also, employment data (spun or otherwise) has shown to have created sufficient jobs and reduced unemployment to calculate to the mystical 5.0% goal, which today is considered "full employment".  Continuing incremental increases in the rate are expected on a "data dependent" basis, i.e., as long as the economy continues to improve, rates will be "inched along" toward normalization.

Observations & Analysis:

Almost universally within the CRE industry, the experts are heralding the move as appropriate, expected, and of no immediate consequence to a disruption within the industry.  While CRE cap rates are low, there is sufficient spread between these and conventional market investments to absorb this increase, and possibly additional raises.  There is also an abundance of investment capital available to support any price slides that may be in the offing. Additionally, an already strong dollar will be further enhanced by the increase, thus attracting still more foreign currency into the U.S. markets. While rents typically increase with rising interest rates, the pronouncement of a strong and expanding economy is seen to be more helpful to increasing rental demand for space, even with potential rent increases. Although the Fed raised the Fed Funds rate and this will raise in sympathy other short-to intermediate rates, CRE industry experts expect the long end of the yield curve to have no effect. (Hum-m-m ... if short term rates increase and long term rates stay unchanged, this begins to invert the yield curve.  Inverted yield curves traditionally have forecasted recessions!)


Public securities markets, primarily the stock and bond markets, have been elevated beyond economic justification by the excess liquidity provided by the Fed for the last 7 years.  To suggest they are a bubble is a gross understatement.  It's widely anticipated these bubbles will burst - correct valuations; the only uncertainty is when.  Until they do (or the hold together long enough for the economy to improve sufficiently to support current values - unlikely, but possible) they'll likely continue to exhibit the volatility we've seen for the last (several) year or so.  (Gas station note:  the bubble pricing in the stock market where a share represents ownership in the underlying company has not transitioned to privately held companies.  That is, the multiples that gas station businesses with specific markets in AZ sold at prior to 2007-08 has not changed notably over this period.  The change in pricing is largely due to increases in the real estate.) 


To all this, we at MJG are skeptical. The data dependence the Fed glows over has been spun to a point past disingenuous. Globally, many if not most of the G-20 nations are in some state of recession and/or deflation, and the U.S. will not - cannot - decouple from the world.  We believe there's better than a 50/50 chance that the U.S. will be in a recession in 2016. (Recession-calling being what it is, it's likely to be 6-9 months after we actually enter a recession until it's called ... by many measures we're already in one!) The last thing you want to do in a recession, or economic downturn by any other name, is raise interest rates.  If the economy stalls (which it was already doing prior to this increase) the Fed, if it has an ounce of integrity, will have to back-peddle and loosen again.  This doesn't mean a reduction of the rate they just increased, although they may, they may instead choose some other method of monetary accommodation, e.g., the next QE program. 


At any rate (pun intended), what passes for public consumption and advertised by industry experts may contain just a tad of self-servitude. 


Q3-15, COUNSEL MORTGAGE ANNOUNCEMENT

We're pleased to announce that Counsel Mortgage is now licensed in California for the origination of both residential and commercial mortgage loans.  Requests to or through MJG for residential mortgages will be referred to a licensed residential originator at Counsel Mortgage - Counsel Mortgage Loan Officers who are also AZ real estate licensees will work only with commercial mortgages. 

(CA DBO# 60DBO43873; CA MLO# CA-DBO179539)


July 17, 2015


Completed small-business convenience store transactions declined in therms of the number of deals and median sale price in 2014 compared to the prior year, per BizBuySell in it's 2014 Insight Report.  (The data offered may be considered exclusive of multi-site mergers that were not part of the BBS listing universe, typically one-off transaction.  Note that the prices shown are exclusive of real estate, i.e., tenant-occupied businesses.  Data is national is scope.)


A total of 266 small-business c-store transactions closed in 2014 at a median sale price of $140,000, compared to 350 such transactions at an average sale price of $195,000 during 2013.  Median revenues of the c-stores sold in the most recent quarter were $540,000, with a median cash flow of $94,000.  This compares to $595,000 and $104,172 in the prior year, respectively.


Jan. 13, 2015


Yesterday the Senate voted to consider legislation that would give the go-ahead for construction of the Keystone XL pipeline.  The House passed it's measure last week. Expect the Senate to doctor it up with amendments, but ultimately get a vote - something that never happened in prior years when Harry Reed ran the Senate.  A final version is expected to pass, after which it will be sent to Obama for signing, which he won't do.  All expect a veto here, and it isn't expected that the Republican majority in both houses can persuade enough Democrats to jump ship and vote for the measure so as to over-ride the veto.


Comment:  This issue as well as many other legislative measures that have been stalled in Washington, is grist for the political mill. Seemingly it's purpose here is to demonstrate that Obama is the barrier to legislative accomplishment, and not the congress. To that end it will probably suffice


Dec. 3, 2014


The 3rd version of PCI (Payment Card Industry) policies and procedures become effective Jan. 1, 2015 (next month!). This latest version of rules initially introduced 3 years ago These newer rules focus on not just securing the server, but on the data itself.  Because more companies are now relying on 3rd party providers that receive cardholder data and store it in the cloud, the latest PCI rules expand the responsibility to all involved ... read that to be you, the merchant.  Companies show to be non-compliant risk losing their ability to process credit card transactions.


Comment:  We suggest you contact your insurance company to be sure your new exposure to this risk is adequately covered in your policy.


Dec. 1, 2014


OPEC had their annual meeting last Thursday, Thanksgiving here at home.  With crude oil prices dropping rapidly over the last several months, the expectation was that they would vote to reduce production in an effort to create a shortage (supply), thereby stabilizing or even increase prices.  Such was not the case - surprise!  They voted to keep their collective production unchanged at 30 million bbls/day, and in effect creating an oil war.  Going into the meeting WTI was about $71/bbl.  Friday after the vote was known, WTI collapsed to close at $66.15/bbl.


As mentioned before, the fracking folks break-even in the mid-to-low $70's /bbl.  If the sub-$70 price holds (which we don't expect), you can look for some reduced production from fracking producers, and a knee-jerk reaction at the wholesale & retail levels.  Reduced production will likely lead to lay-offs in the affected markets - not good for the local economies, or the national consumer attitude going into Christmas season. 


Comment:  In any event, expect more volatility in fuel pricing.  Technically, from historical pricing charts, if pricing in the low $60's fails, next longer term support is in the low $40s.