This year’s Spring Convention, held in San Antonio at the Westin La Cantera Resort on April 27-30, received rave reviews from an all-time high attendance of 607 people, that’s 75 more participants than the previous 10-year SIGMA Spring Convention average. All attendees enjoyed the usual intoxicating SIGMA treatment: mixing good fellowship, cutting-edge educational sessions and exciting after-hours activities with a lush golf resort atmosphere.

“One of the best that I’ve attended,” said a SIGMA fuel marketer. “The overall educational content was excellent, the Valero reception was outstanding, and we heard some great presentations.”

The educational sessions ran the usual eclectic range, from how hedging is affecting crude price to a look at new competitors in the market, and disaster planning to how new technology can help manage volatility. The ultimate educational draw to San Antonio for marketers, however, went to the session on ultra-low-sulfur diesel.

The ULSD session covered pertinent information marketers needed to know before the fuel debuted in June. Environmental Protection Agency representatives Tia Sutton and Jeffrey Herzog covered ULSD regulations — particularly sections that needed some clarification — while CITGO’s Tim Crowe addressed what operational procedures marketers had to change by when, along with quality assurance programs, challenges and transport issues.

A marketer panel, moderated by Greg Scott, wrapped up the session by reviewing the coveted Retailer ULSD Checklist line-by-line, discussing different operational aspects marketers should be considering at this point in time. Panelists included Andy Wood with Petro Stopping Centers LP; Bruce Blaise with Kenan Advantage Group; Ben Wafle with Quarles Petroleum, Inc.; and David Dobbins with Pilot Travel Centers.

Hate you missed it? You don’t have to! Thanks to DTN, SIGMA will be providing recordings of this educational session on DVD for $99 (SIGMA member price) or $149 (non-SIGMA member price). Additional copies of the Checklist will also be available.

The General Session also featured some of these aforementioned presentations, including the final installment of NPN’s Station Resuscitation program, Tesoro’s Vice President and Chief Economist Lynn Westfall and Valero CEO Bill Klesse.

NPN’s Station Resuscitation project featured retail “guinea pigs” Top Star’s Joe Stark and Stewart Spinks of The Spinx Companies, reporting on how their respective projects turned out. While the Top Star site was still fighting through some permitting issues, the redone Spinks location is up and running, and Betsi Bixby of Meridian Associates, who consulted on the project, said that “both gentlemen really made excellent decisions with their stores.”

Westfall, clearly a favorite among convention attendees, presented information about the current finished product supply/demand situation, including what factors contributed to the price changes and how to determine future prices based on these factors.

He began by alluding to some factors, like miles-per- gallon standards, which may change in the next several years. He went on to say that it will take more than 10 years to replace the existing fleet and only then will it create an impact, however significant, on price.

He dispelled the myths that economic growth standards, growth in petroleum demand or OPEC utilization rates set crude prices by showing low correlation rates between these factors and actual crude price. Instead, Westfall linked crude prices with refinery margins, which reflect the balance between supply and demand since gasoline prices do not adhere to traditional supply-and-demand matrices.

“Gasoline demand grows every year, no matter the economic cycle,” he said. “Gasoline does not respond in the classic manner because it doesn’t have discretionary demand and doesn’t have substitutes. Gasoline demand doesn’t respond to prices, it responds temporarily to price changes.”

Thus, Westfall forecasted that even crude prices in the $50-$60/bbl range support gasoline demand growth of over 1 percent per year and for the next five years, he predicted gasoline demand should grow in the 1.5-percent to 2-percent range. Even with this demand growth, he predicts prices for crude oil will eventually fall, stabilizing between $40-$50/bbl over the next five years.

With that, he said that the current Tesoro model shows “crude prices will come down, come down very quickly and settle around the $40-per-barrel level.” He added one caveat, however: “Crude oil trades on headlines and you simply can’t forecast that.”

Bill Klesse, CEO of Valero, followed Westfall by saying that the string of new regulations by the Environmental Protection Agency over the past 15 years helped put us in the price bind we are currently in.

“Every regulatory action reduces the supply of clean product,” he explained. “There have been 10 new regulations since 1989 and not one has put a gallon of supply on the market.”

Klesse’s presentation came two days after he and Valero had hosted SIGMA members and guests at its corporate headquarters for a lavish outdoor Supplier Welcoming Reception complete with live music, branded-Texas steaks and Valero ice sculptures overflowing with mounds of shrimp.

“This was the best Spring conference that I have seen to date,” one SIGMA participant said. “The attendance was very good and the events were excellent, particularly the reception at Valero.”

Valero also played a prominent role in the Motor Fuel Outlet Tour with stops at Rudy’s Country Store and Bar-B-Q, which also doubles as a Valero retail gasoline outlet, though judging by the throngs gobbling down the barbecued goodies, it wasn’t out of the realm of possibility to wonder if Rudy’s pumped more gallons of gasoline or barbecue sauce during a given year.

The Outlet Tour also included stops at a more traditional, wreck-and-rebuild Valero retail site that
had increased its combined indoor and outdoor sales from $16,000 to $24,000 per day in the month since it reopened, and a tour of Valero’s year-old Retail Distribution Center, which is operated by CoreMark International.

Not to be outdone, SIGMA’s own Theme Dinner featured singer/songwriter Jerry Jeff Walker, infamous among the Texas crowd. Walker, a lively entertainer, delivered a riveting and fun 60-minute show. Along with his band, the Gonzo Compadres, Walker sang mostly his greatest hits, including “Mr. Bojangles,” and in the process played songs that even people unfamiliar with him recognized.

“We thoroughly enjoyed Jerry Jeff’s performance,” said Gregg Strasburger, president of Fuel Distributors out of Temple, Texas. “Although I thought it was too brief, the music and the dancing were a lot of fun and the crowd around us had a great time. I even had one ‘rock-n-roller’ comment that he enjoyed the fact that some of the music didn’t sound like country and western.”

Legislative Committee

Fuel supply and demand, as well as climbing gasoline prices, monopolized the conversation at the Legislative Committee Meeting during SIGMA’s 2006 Spring Convention, allowing SIGMA counsel Tim Columbus — who’s exceedingly verbose under normal conditions — to really cut loose.

“I have not seen a feeding frenzy like this, ever, and the most amazing thing is the way the Republicans are acting,” he said. “It’s a perfect storm and nothing can be done short-term to help a lot. Congress is acting out of an incredible amount of raw ignorance. This is going to be the year of the big fuel brouhaha. If you’ve enjoyed what happened this spring (MTBE phaseout in the Northeast), you should see what’s gonna happen this fall (new ULSD regulations).”

In addition to the hue and cry over Congress’ misguided attempts at price-gouging justice, the Legislative Committee Meeting also included an update from NACS President Hank Armour on the state of the Merchants Payment Coalition’s, of which SIGMA is a member, lawsuit against Visa, MasterCard and the eight largest banks and their “monopolistic” interchange fees.

The latest NACS figures show that credit-card fees rose to 7.8 percent of gross margins and cost the industry $5.3 billion in 2005. “This is the most important financial issue our industry has faced in a lot of decades,” Armour said. “The problem is monopolistic pricing. We’re all in favor of making money, but the problem is when the market is broken, and this market is broken, it’s nothing short of price-fixing.”

Armour reported that the lawsuit is moving ahead, but that he expects it to be a three- to five-year process. “If we can make this happen faster, we would, but we also don’t want to over promise,” he said. “This is like climbing Mt. Everest three times in three days.” To sum it up, one participant said: “The best convention going...we had a wonderful time, and made many, many contacts in a great setting...many thanks to SIGMA for the first-class convention.”

SIGMA far exceeded its participation goal for the Spring Convention and is now in the process of changing gears: to do the same for the upcoming Annual Meeting in Chicago from Nov. 10-12.

“Chicago is the perfect city to learn how to maximize on what’s going on in the industry today,” said Grady Chronister, Annual Meeting Chairman and President of Chronister Oil Co. “Home to BP and at least four market exchanges that pertain to SIGMA members, we’re going to capitalize on our time spent in the Windy City. SIGMA’s also lining up some knockout major-oil company speakers; this will be one of our best!”