Posts Tagged gas prices
On January 10, 2012 I wrote a blog titled ‘Hopes for the New Year’. In the blog I laid out my hopes that 2012:
“turns out to be a great year for those in the automotive glass repair and replacement (AGRR) industry (or if great is too high a bar to set at the very least better than 2011)”.
Since we’re nearing the end of the first quarter of 2012 I thought that I’d take a quick look at the first hope I listed for this year. My first hope was regarding the 3 key business drivers for the AGRR industry – weather, the economy and miles drive.
Weather – I had asked for ‘good’ weather for the year. ‘Good’ meaning bad of course. That means snow, hail, and especially ice if you happen to be in the AGRR industry.
As I’m writing this blog watching March Madness the temperatures in Illinois are in the mid 70’s and the sun is shining. Farmers in the Midwest have already been in the fields doing prep work getting ready to plant crops in the near future if the temperatures stay this warm. The lack of a winter in 2011-2012 is discussed in an article titled ‘For much of the USA, winter never got off the ground’ . In the article is a graph that details the year-on-year drop-off in snowfall in major cities across the Northern states. the lack of snowfall is blamed on the location of the jet stream this year to last. For those in the AGRR industry, hopefully it will get back to where it belongs in the 2012-2013 winter season. On a personal level I’ve enjoyed the lack of snow this winter, but from the Upper Midwest to New England the mild winter has forced countless companies to take a hard look at costs they can take out of their businesses. Costs equate to people.
There has been welcomed hail this year in a number of states. This obviously brings glass breakage, but sadly much of that hail came with tornado’s that caused death and destruction as well.
I haven’t talked to anyone in the U.S. who is happy with how this year has started or how they’re doing year-on-year. Regardless of whether they’re a retailer or a supplier it appears that everyone is hunkering down in 2012. The only ones who might have a slight smile are insurers.
It’s not only here in the United States, even the venerable Belron keystone subsidiary in the United Kingdom Autoglass® has had to “slash jobs at its head office and axe 16 out of its 101 branches resulting in a large number of redundancies (lay-offs)“ as reported on February 29, 2012 by the Insurance Times – UK.
The Economy – Indications are that the economic environment is moving in the right direction with the February 2012 unemployed rate down to 8.3% from a high of 9.1% in August 2011 as reported by the U.S. Bureau of Labor Statistics. The Wall Street Journal – MarketWatch.com reports retail sales improving in the first two months of 2012 and home prices and sales are beginning to rise seemingly pointing to a turn-around for the housing market.
All of this is good news if you’re a retailer, but the signs of a recovery could be short lived as Bloomberg reported last Friday that the Thomson Reuters/University of Michigan preliminary index of consumer sentiment fell to 74.3, the lowest this year, from 75.3 the prior month. That means consumers aren’t feeling too confident in the recovery quite yet.
What’s happening on the national economic level is important, but even more important is what’s happening in the local economy in which you operate. What’s the unemployment rate in your market, how are retail sales and are you seeing a recovery in the housing markets? How is your business performing so far in 2012? Feeling good or bad about your prospects?
Miles Driven – Miles driven has shown some minor improvements at the start of the year, but that might be short-lived. In early January Ed Morse, Head of Commodity Trading at Citibank was predicting $ 4 a gallon gasoline as a floor price by the end of May 2012. As of today the average price in the United States for a gallon of gasoline is $ 3.84 as reported by the U.S. Energy Information Administration. A few blocks from where I live in Chicago a BP® gas station is selling regular unleaded gasoline for $ 4.459 a gallon and $ 4.709 for premium.
Recently ExxonMobil’s CEO Rex Tillerson spoke with the TODAY Show’s Matt Lauer and said “Despite rising crude oil prices and threats to stability in the Middle East, the price of gas is unlikely to reach a national average as high as $5 per gallon in the near term”. Well isn’t that comforting news.
Politico recently reported that President Obama’s Energy Secretary Steven Chu was “walking back” his comments in an interview he had with the Wall Street Journal in 2008 when he told the newspaper,
“Somehow we have to figure out how to boost the price of gasoline to the
levels in Europe”.
Really? The prices per gallon in Europe in 2008 averaged over $ 8 per gallon as reported by CNNMoney.com and in 2008 the price for a barrel of oil reached a high of $ 147.27. Today oil is hovering around $ 108 per barrel and the average price per gallon of gasoline in the United Kingdom is over $ 8. Can you imagine what the price per gallon will be if (or when) oil goes higher?
The tensions that continue to build in the Middle East between Israel and Iran obviously add further concern to the price of oil and the gasoline our industry relies so heavily on.
Hopefully all of the key drivers that effect the AGRR industry will all trend positively in the coming months, but with the price of gasoline being such an overriding influencer of both miles driven and the economy even the prospect of future weather events won’t help. What the industry doesn’t need are consumers who become ‘do nothings’ by keeping their hands in their pockets holding onto their cash unsure of what’s coming later this year. If that happens, retailers and suppliers alike will continue to have to make those very hard decisions on what costs to cut next. The first and easiest cuts always involve people.
People are the ultimate key driver to any successful business. Companies that don’t recognize the incredible value that attracting and then keeping the most talented people undoubtedly will suffer when weather, the economy and miles driven have a negative impact on the business. Recognizing that employees are the key driver that helps every organization find ways to innovate, increase customer service levels and create value for all stakeholders will allow it to flourish and remain competitive in the marketplace.
I wrote in a blog earlier this year about the need to ‘Be Smart in 2012’, quoting Coach Pete Carril who said, “The strong take from the weak, but the smart take from the strong”. I hope you’re being smart in 2012.
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I’m hoping that 2012 turns out to be a great year for those in the automotive glass repair and replacement (AGRR) industry or if great is too high a bar to set at the very least better than 2011. In my opinion there are few key things that need to happen (and perhaps more than a few) for 2012 to be a great year. I’ve listed some of my hopes for 2012. Perhaps some are on your list as well.
- Our industry is affected by three key business drivers: weather, the economy and miles driven. Sadly we have no control or influence over any of these so I’m hoping for some luck for 2012.
Weather – I’m hoping to see “good” weather this year. I think you know what the definition of “good” means. For the most part 2011 was a “good” weather year.
In many markets, the AGRR industry and all those affected by it rises or falls depending upon the severity of the winter season which means snow. A severe winter brings increased breakage while a mild winter has the opposite effect. Annual demand obviously can vary considerably based on those weather fluctuations. I have many friends that compete in the snow-belt and at this time of the year they are looking at weather reports day-in and day-out to see when and where that next big snow will be. That snow, of course, has to come in the right amount and at the right time of day for maximum effect and that would be during rush hour. It would be great to see snow come in every other week so that after that big snow there would be sunny weather that follows allowing all those new repairs and replacements to be completed. If there is no snow, owners/managers are forced to make tough decisions they’d prefer not to make relating to cutting expenses, so please let it snow. Snow brings out plows and salt trucks. If the area you live in still uses gravel or coal or sand, even better.
Then there is ice. Ice can be even better than snow for the AGRR industry. Then there are cold snaps that can cause star breaks to run out when drivers go out and clean frost off windshields on cold mornings with scrapers or even better – hot water. And when drivers turn on the defrosters to get rid of frost and warm air hits cold windshields.
Hail is nice too. Of course not too small that won’t break the glass, but not too big either. Just the right size will do. Rain isn’t ever really that good for our industry, but if it does rain please let it rain at night.
The Economy – My hope for 2012 is that in the United States and everywhere else in the world the economy becomes robust. Since 2007 -2008 the economy in the United States obviously has not been robust. During economic downturns many who experience auto glass breakage – the “do nothings” – delay repairs and/or replacements. Everyone in the industry hopes that as the economy improves those “do nothings” will replace that broken auto glass.
A fully-employed workforce in the United States would be great. My hope for a robust economy includes the wish that everyone has a great job and that its a great paying one. All those fully employed people should have a car too — actually several cars would be even better. It would be great if all those cars would be fully insured with a zero dollar comprehensive insurance deductible. And, since these are my hopes for 2012, I hope that all those cars are fully insured with an insurance company that doesn’t use Safelite® Solutions as its auto claims administrator (I’m guessing most of you’d agree with me on that one). I hope everyone is going on vacations this year and preferably driving to all the beautiful places there are to visit and see in our great country.
A bad economy requires those competing in the AGRR industry to take an introspective look at their businesses. That introspective look should include “SWOT” – your strengths and weaknesses versus the opportunities and threats you face. How you deal with SWOT generally determines how successful you’ll be.
Miles Driven – Miles driven are key to auto glass breakage and my hope is that for 2012 gasoline prices remain “low” which will equate to more miles driven by putting more people in their cars and on the road providing more opportunities for drivers to break auto glass.
The total monthly vehicle miles driven have been growing since the federal government started tracking the data. In September 2011 the Department of Transportation’s Federal Highway Commission released an in-depth Traffic Trend Report. If you follow this link to a graph on miles driven, after hitting a moving 12-month high of 3.039 billion, yes billion miles driven in the rolling 12-months ending in November 2007 the graph shows a down-tick in estimated vehicle miles driven that occurred in 2008 – 2009. Thankfully the miles driven appear to have somewhat stabilized for now.
But the cost of gasoline is a major influencer relating to total miles driven. On December 18, 2011, a Chicago Sun Times (Chicago Sun Times article) article titled “At gas pump, 2011 was the year of the big squeeze” reported on the annual cost of gasoline for the average American family in 2011. The opening line of the article stated, “It’s been 30 years since gasoline took such a big bite out of the family budget.” The article goes on to report, “the typical American household will have spent $ 4,155 filling up this year, a record. That is 8.4 percent of what the median family takes in, the highest share since 1981.” This wasn’t good news for AGRR retailers in 2011.
On January 6, 2012, a Los Angeles Times (Los Angeles Times article) article titled “Gasoline prices start the year at a high – and rising” reported on how gasoline prices are starting out this year. The article states, “but this also may be the year of the gas-pocalypse, analysts warn. That’s because gasoline prices are the highest ever for the start of the year, and they’re on the rise, supercharged by expensive oil and changes in refinery operations.” That’s certainly not good news for AGRR retailers looking for 2012 to be a better year than 2011.
The AGRR industry really needs to see lower gasoline prices that will cause a spike in miles driven for its business outlook to improve in 2012. Based on predictions made by Edward Morse, head of commodities research at Citigroup Global Markets, Inc., on December 22, 2011, on Bloomberg Television’s “Surveillance Midday” that doesn’t seem likely. If you follow this link Mr. Morse talks about factors affecting the crude oil market and the outlook for oil and gasoline prices. You’ll see that he holds out little hope for “low” gas prices in 2012. Mr. Morse sees the floor for gasoline prices to be $ 4 by the end of May 2012. That’s certainly not good news for AGRR retailers in 2012.
My hope for 2012 is that gasoline prices are low and miles driven are high. Based on the realities of the marketplace and comments from experts you’d better cross your fingers and say a prayer for that one.
- I’m hoping that in 2012 some entity – some organization or company in the AGRR industry steps up and becomes a leader for the industry. By the way, I’m certainly not suggesting that the “market leader” can assume that role. I don’t think that’s possible. I am hoping that leadership is shown by someone who really cares about the AGRR industry and the issues that it faces, offering positive ideas for all to improve the valuable services that the industry provides to consumers.
- I hope to see fewer imports of auto glass manufactured overseas coming to the United States/North America and the imports that do come to our shores at least be from those companies that are major suppliers of Original Equipment Manufactured auto glass to car manufacturers and not those who primarily make after-market parts.
- I hope that every windshield that needs replacing in 2012 is replaced using the Auto Glass Safety Council’s auto glass replacement standard known as the AGRSS® Standard. The standard is accredited by the American National Standards Institute (ANSI) standards development organization. The AGRSS® Standard (ANSI/AGRSS® 002-2002 Automotive Glass Replacement Standard) is North America’s only auto glass replacement standard and it addresses the proper procedures that must be used by auto glass technicians, along with other company employees who are also important to ensure the safe installation of auto glass. No other company or organization maintains any standard remotely similar to AGRSS®. I also hope that replacements are completed using a urethane that provides a 1 hour safe drive away time. Your customers deserve nothing less.
- My final hope is that someone steps up and attempts to compete on a larger scale against the market leader. The industry really needs a strong competitor to Safelite®. I really don’t care who that is, but come on already. Somebody step up on the retail or third party administrator side and give them a go.
I hope everyone who competes in the AGRR industry the best of success and luck in 2012.
And finally I’m hoping for a great 2012 for myself.
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