Get Ready, AvGas prices are going to Jump


#1

I work at an FBO in the midwest. Our supplier normally changes prices weekly and since the first of the year it seems our cost and prices have been steadily climbing. Then a couple weeks ago things seems to have peeked and leveled off. Jet Prices have stayed nearly the same for several weeks and Avgas had gone down, not much but some.

Then there was this week. :frowning: An order of fuel we had ordered for a monday delivery had to be trucked in from over 550 miles away. I knew the freight would be higher but was shocked to find out it was MUCH more than just additional freight. I called my fuel rep and found that the AvGas market is in a real mess. There is not enough avgas refined to cover the demand PLUS there are distribution problems due to the drought. Barges are not making it through a lot of their normal routes with full loads of fuel. Some have even had to back track to off load fuel.

This has caused a ripple effect. Normally oil companies exchange fuel at the terminals. Phillips will trade with AirBP in one location for fuel in another, or Chevron will trade with Exxon. This is apparently a “loose” agreement. Now because of the shortage everyone has stopped trading with each other. Everyone is hording fuel, which is why our fuel was trucked 550+ miles. The jump we experienced was not only because of the additional freight but because the terminal knew they could get by with it. We were lucky to get fuel. There are apparently numerous terminals running out of product. A nearby business that buys their own bulk fuel went to order it today and found they could not even get any. If they do not they will have to shut down.

As the retailer we are the bad guys in the customers eyes. We are not making a penny more per gallon but have the unenviable task of telling customers about the jump. I have to call and warn all of our business customers so they can adjust their prices accordingly.

The big winner in this seems like the state governments. Most state sales taxes on fuel are a percentage. A 75 cent jump in our prices nets the State an extra 6 cents per gallon. With the rising cost of Auto and aviation fuel over the last year, the states coffers should be overflowing.

You have been warned!

Paul

PS: Don’t blame the FBO’s its not anything we can control


#2

Hmmm, not so sure I can swallow this…

KJAN Mercury Air 4.99 per airnav.com
M16 Hinds College 3.95
KMBO Madison Air Center 4.25

Distance between airports 10 miles

We are talking about over a 1 dollar difference PER GALLON for Av Gas. Is Mercury air gouging us? Overhead at KJAN can’t be that high at a class C airport in podunct MS.

Cost of trucking the stuff can’t make that much difference between airports only 10 miles apart as the crow flies, so somebody is controlling the price of fuel. Gotta be the FBO or how does one account for such a wide disparity between airports.

KMBO and KJAN are Chevron! A 100ll gallon of Chevron av gas is a gallon of Chevron 100 ll av gas, it’s not like it comes in different flavors. And it’s from the SAME company

Hmm, lets gander over to KBWI. Signature air charges 7.00 per gallon. Just exactly what is in that Avgas that isn’t in Avgas in Mississippi. Now we are talking a 3 dollar difference for ONE GALLON of avgas. Something is radically wrong. Car gas price disparity is not that huge. Could it be the “Signature price” that goes along with Signature FBOs

Inquiring minds would love to know!

Allen


#3

More interestingly, check out the different fuel prices at FBO’s at the same airport.
TEB has *at least *5 different FBO’s.
100LL prices according to Airnav:
Jet Aviation: $7.29
Signature: $6.88
Meridian: $6.45
First: $4.87
Atlantic: unknown
Is Jet Aviation’s 100LL made from the finest stuff on earth? Does it come with a free back rub or do they powder your airplane’s butt for you or something? For $2.50 more PER GALLON, plus tons of fees tacked on they aught to do something for you!
100LL must be very hard to come by at the south end of the field.


#4

Hmm, for legal VFR, 50 gallons to top off my tanks allowing 30 minute reserve in my simple ole Beech Sundowner. Lez C

J.A. 364.50
Sig 344.00
Mer 322.50
Fir 243.50

$121 difference for top off of fuel all because of location at the same airport??? 33 percent discount at first???

Wait, it gets better. Let me fill up at M16 at 3.95 a gallon and I pay 197.50 for a top off which is a whopping 46 percent discount!!!

I just don’t get it, we are talking 50 gallons of 100LL av gas. To have such a wide disparity, it has to be FBO.

Manufacturing cost at where ever Av gas is manufactured is the same no matter where it’s shipped.

And assuming distance for shipping is factored in, be rest assured M16 is not even close to any refineries that I know of, so that cost can’t be that signifcantly different from one airport to another and even worse, from one FBO to another.

So… pmlabrier, how do you justify these disparities???

Allen


#5

My point in saying:

PS: Don’t blame the FBO’s its not anything we can control

was not to justify price disparities between airports or FBO’s. My point was to warn of a probable jump in AvGas prices that is beyond the control of FBO’s.

If your favorite FBO gets a price increase notice of 75 cents per gallon between one load of fuel and the next, you will see it on your next fuel bill.

There may even be disparities in price on the same field caused by this. If Phillips fuel is available at the local terminal but they are only selling to to Phillips branded dealers instead of allowing AirBP, Chevron, Exxon or whoever to pull product there its going to cost other FBO’s in that area more to have it trucked from other terminals. If a terminal knows that they are your only source for fuel what do you think they are going to do? Gouge the FBO and jump their prices.

This will effect FBO’s that operate on a lower margin more than the ones that have a higher margin. Jet Aviation at TEB could probably ride out a short term spike in price of .75 to a dollar where First could not.

Why is there such a difference between FBO’s at TEB? I have not clue. I am not familiar with that airport.

Why are there differences between airports, even in the same region? Many reasons. The cost of doing business at one airport can be drastically higher than even at neighboring airports. This is not always the case, but the cost of doing business can vary greatly between an airport in an metropolitan area and an airport even just 15 to 20 miles away.

Some airports are operated by local governments. City or County operated FBO’s can operate at a much lower margin. Their insurance, for one, can be much less than a private businesses becasue they fall under the umbrella the municipal insurance instead of needing a policy just for the FBO. Also, many times their operating costs are hidden in the overall budget of the city or county. This is tough for a private run FBO at neighboring airports to compete with. It is not like this everywhere, but for 10 years I worked at an fbo in the southest. There were times that municipally owned airports in our region had fuel prices lower than the COST of my fuel after taxes. Not a whole lot i could do about that.

Sorry, I digressed from my point, which was to warn everyone of a spike that I see coming in Avgas. I hope I am wrong and that my fuel rep is just exaggerating the situation but I do not think so.

Paul


#6

Welcome to Econ 101…Supply & Demand baby!!!

Avgas prices jumped a little here in Tulsa, but then again, with all the heavy metal at both RVS and TUL this week, demand will definitely outweigh the supply. Local FBO owner I know said that they got about 30% more requests for fuel and hangar space than they predicted. Father in-law decided to rent out his hangar to someone for the week because of the higher demand for hangar space.


#7

So, in affect, it’s the FBO that sets the fuel price depending on how much they want to ummm gouge the consumer?

I fully understand what you are saying above regarding overhead operating expenses, but if the price of gas is the same coming in, then the price going out to the consumers should be reasonably close, just like the street corners that have 4 gas stations competing for business.

After all we are talking just a gallon of gas, pennies and being liberal, dimes difference for profit margin ok, but when you are talking dollars difference for one gallon of gas, that is gouging the aviation consumers.

Allen


#8

Then the failure point still remains the FBO since they didn’t predict the needs for the spike. I don’t really think av gas has an expiration date like milk, does it?

I realize hangar space is a way different issue as one can’t build hangars for a one time event so that I can understand why shortages do come up, but when it comes to Av gas, if the fuel barn can hold X amount of fuel and they fill up the fuel farm to capacity, one would think the FBO can handle a spike in business (especially when it’s expected).

Allen


#9

They predicted and planned for a spike, based on numbers from when the 2001 U.S. Open was here in town. Both FBOs at RVS “topped off” their tanks of Avgas and Jet A Sunday morning, before the onslaught of aircraft got here. There are just more people chartering or flying their own birds in this year compared to 2001. Yes, they did plan for numbers higher than 2001.

Avgas, just like regular gas we put in our cars can go bad. It usually takes a little longer, but it can go bad.


#10

Again, I am unfamiliar with the FBO’s at TEB or why there is such a price spread. My point was that the lower priced FBO’s will be less likely to be able to absorb an overnight price increase of 75 cents a gallon without jumping their prices to the customer up.

Switching to your topic. If there are three FBO’s surviving on the field that are $6 plus a gallon for Avgas, somebody must be wanting the services they offer. My guess is that they do not mind the price conscious pilots going elsewhere. They are likely catering to the segment of the aviation market that does not care what they spend, they want services. Be thankful that there is an FBO on the field that does cater to the price conscious pilots.

Paul


#11

Perhaps the disparity is in the supply part of the chain. First may still have lots of avgas in their tanks from their last order while Jet Aviation (who may sell more of the stuff) may have just recently received an order. And Jet Aviation is probably a “five star” FBO while First is only a “two star” joint (just guessing on the last point). I would expect First’s price to jump higher when they get their next shipment.


#12

So, pretty much what you are saying, that $1 per gallon profit is acceptable. It’s not like they get their fuel farm filled up everyday. And when costs go down, why don’t we see the same drops as rises. Sounds and smells like gouging.

Just like you, I am not familiar with TEB. Having a choice is great, but I cannot imagine what services would warrant a $1 per gallon surcharge on Av gas as compared to another FBO on the field. Maybe I am too low in the aviation food chain to understand?

Allen


#13

Afraid that isn’t case. Signature and First have both updated their fuel prices this week, but all the other three have been that high for a couple weeks. The jump in price was over this last weekend when Phillips notified the other Oil Co. that they would no longer exchange fuel. Fuel from their terminals go only to Phillips Branded FBO’s.

The is more likely the case. Not sure if First is only a “Two Star”, but Jet Aviation is definitely a “Five Star”, well maybe a “Four Star”, I would dock them one for over charging. But when a large part of your customer base doesn’t care what the cost is, why not.

Paul


#14

BINGO!


#15

It is not a big surprise to hear that consumers like how a free market economy works when prices go down (like they have in so many areas since the advent of cheap Chinese products, which most economists say have added a point or more to US GDP growth and kept inflation rates low for several years), but not when they go up. While there may be an argument that these oil companies are actively conspiring to raise prices (and therefore violating on of the key pillars of a free market, as well as several laws), I don’t see them risking that for something as small as the avgas market.


#16

No, i am making no judgments on what profit is acceptable. The simple math of it means that an FBO selling fuel for over a dollar less per gallon is less likely going to be able to absorb a 75 cent per gallon increase in cost than the other FBO’s. There is $2.42 difference between Jet Aviation and First Aviation. Jet can likely ride this jump out without changing their price.

I have worked in the FBO business on and off for over 20 years. It used to be that our price almost never changed. our cost fluctuated up and down but kept a fairly consistent median level. The last several years that has changed completely. Our prices fluctuate weekly. When we get a price increase our price goes up BUT when we get a decrease our price goes back down. Unfortunately, there have been more increases that deceases lately.

Just like you, I am not familiar with TEB. Having a choice is great, but I cannot imagine what services would warrant a $1 per gallon surcharge on Av gas as compared to another FBO on the field. Maybe I am too low in the aviation food chain to understand?

Allen

It is probably a combination of things. The $7.29 price is more of a deterent. Do they even want Piston aircraft. They can make more fueling on G5 than all the 210’s they could fuel in a day. Maybe they would rather small aircraft go elsewhere. Also, there is a segemt of even the piston traffic that does not care what they pay.

Paul


#17

I’ve heard $1 per gallon profit is the norm locally.

The other day the line guy at the FBO I use came out and asked if I needed anything. He checked my fuel and oil and topped off the fuel for me. He thanked me for all of my recent business as it keeps him employed. It took him less than five minutes to get the truck and fuel me. $10 profit for five minutes work… not bad.

In my case, it all goes through my club and they probably get a nice discount. Either way the service is good and the line guy connected the dots that I’m flying alot and he gets his hours.


#18

who cares
the future of avgas is well…limited
can anyone say 95UL


#19

The above defies logic, but then again, there are things I recognize I am not privy to in the busines sense.

My simple mind sez:

If a business would not make much profit on a C152 (which would be far and few between in a Class B airport as compared to turbine) then why even sell Av gas? Seems to be more costly to store the stuff and bleed it out gallon by gallon when they don’t want pistons there in the first place. Let the “other FBO” deal with us peons by not even carrying Av Gas.

Better yet, signage with a circle and a line through C152 / C172 / BE23 :smiley:

You are probably right, but surely not enough to justify the maintenance cost of Av gas?

Allen


#20

We’ll have to start packing flour bombs! :smiling_imp: