EPA very much prefers to announce controversial decisions immediately preceding a federal holiday.  It is likely they do it intentionally to limit negative press. Most of the Washington establishment (i.e. trade associations, lobbyists, reporters, and Members of Congress) are winding down operations for the holidays,  therefore the reaction is muted.

On Wednesday, November 26, 2014, the day before Thanksgiving,  EPA issued a proposed rule on ozone which will be enormously controversial.  They are proposing to tighten the standard to 65 to 70 parts  per billion, down from the 75 parts per billion set by a George W. Bush-era  rule. EPA is also seeking comment on possibly setting it as low as 60 parts per  billion.

If EPA succeeds in adopting this new standard it will have a significant negative consequence for gasoline refiners and retailers.  Essentially we could see over 200 new counties impose RFG requirements for gasoline. Retailers who market in RFG areas hate it… and rightfully so. Currently there are NO ozone non-attainment areas in Alabama but under the new standard almost the entire state would fall into non-attainment status.

It not only will have negative consequences for our industry, it will stifle economic growth in new areas defined as in non-attainment. The U.S. Chamber of Commerce, the National Manufacturers Association and practically every business trade association (including PMAA)  will be opposing the rule.  Congress will likely move to limit funding for implementing a final rule and any final rule will likely be litigated extensively.

PMAA will be joining like-minded associations in coalitions to oppose this rule and we will keep you updated as those efforts ramp up.

Following last Friday’s House passage of H.R. 5682 which would approve the Keystone XL pipeline, the Senate considered an identical bill (S. 2280) yesterday. Unfortunately, the Senate fell one vote short of the necessary 60 votes to approve the pipeline. Every Senate Republican voted in favor of S. 2280 along with 14 Democrats. Click here to see how your Senator voted. Meanwhile, the failed vote in the Senate did not help Sen. Mary Landrieu (D-LA), a Keystone supporter and cosponsor of S. 2280, who is in a runoff against Rep. Bill Cassidy (R-LA) who sponsored H.R. 5682.

PMAA fully supports the immediate approval of the Keystone XL pipeline. The Keystone XL pipeline enjoys overwhelming support from Americans, with 60 percent saying it should be approved and 25 percent opposed, according to a USA Today poll released Monday. Some political insiders believe that because the Obama Administration did not issue an official veto threat to either bill has fueled speculation that Obama may want to use the pipeline in negotiations with the incoming Republican Congress next year. Keystone XL pipeline supporters will be close to the necessary 67 votes to override a Presidential veto when the GOP takes control next year, plus nine pro-Keystone XL Democrats.    

November 13, 2014

From the Petroleum Marketers Association of America
The House will vote tomorrow on H.R. 5682 which would bypass President Obama and approve the
Keystone XL pipeline. The bill’s sponsor, Rep. Bill Cassidy (R-LA), is in a run-off against incumbent
Senator Mary Landrieu (D-LA) who is cosponsoring a similar Senate bill, S. 2280, which will be
considered Tuesday and needs 60 votes to pass. If the Senate passes S. 2280 and receives a House bill
with identical language, then the House measure would be sent to the President for his consideration.
The Obama Administration stopped short of announcing that the President would veto either bill,
therefore, it’s unclear how President Obama will ultimately end up on the issue. PMAA fully supports
the immediate approval of the Keystone XL pipeline. The Keystone XL pipeline enjoys overwhelming
support from Americans, with 65 percent saying it should be approved and 22 percent opposed,
according to a Washington Post-ABC News poll.

ALEXANDRIA, VA — Declining gas prices may increase holiday spending this year — especially among men and those ages 18-34, according to a new national survey measuring consumer optimism. 

For the first time in two years, a majority of men (51%) are optimistic about the economy and an even greater percentage of younger consumers (56%) are optimistic — and both groups say that they are more likely to increase their spending this holiday season.

Consumer confidence remains elevated as gas prices have dropped nearly 70 cents per gallon to under $3 per gallon over the past four months. For every one-cent decline in gas prices, Americans save an estimated $3.7 million per day at the pump.

Overall, consumer optimism about the economy held steady at 46%, making November the fourth out of five months that optimism was 46% or higher, according to the latest consumer survey conducted by the National Association of Convenience Stores (NACS).

Consumers also have expectations about future gas price declines — over one in four (26%) consumers say that they think gas prices will be even lower in 30 days than they are today. This is the most positive gas price forecast made by consumers since NACS initiated its monthly consumer surveys in January 2013.

Likely as a result of lower prices at the pump, more Americans say they will spend more money this month than they did last month (excluding gas). One in five (21%) U.S. gas consumers say their spending will increase in November, compared with 15% in October. Nearly one in three (32%) of those ages 18-34 say that their spending will increase.

Will the expected increase in spending translate into strong sales this holiday season? While nearly two thirds (65%) of Americans say that they will spend the same this holiday season, only one in seven (14%) consumers say that they intend to spend more this holiday season because of lower gas prices. The two groups most optimistic about the economy are also the most likely to increase their holiday spending because of lower gas prices: 27% of those ages 18-34 and 18% of men intend to increase their holiday shopping because of lower gas prices.

“Our surveys over the past two years show that gas prices clearly play a major role in consumer sentiment about the economy,” said Jeff Lenard, NACS’ vice president of strategic initiatives. “However, declining gas prices alone may not take consumer sentiment much higher in the short term. It may take similarly positive news about the economy as a whole before the majority of Americans feel positive about the economy.”

NACS, which represents the convenience store industry that sells 80% of the gas sold in the country, conducts the monthly consumer sentiment survey to gauge how gas prices affect broader economic trends. The National Association of Convenience Stores (NACS) survey was conducted by Penn, Schoen and Berland Associates LLC; 1,110 gas consumers were surveyed Nov. 5-7, 2014. Summary results are at www.nacsonline.com/gasprices.

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Founded in 1961 as the National Association of Convenience Stores, NACS (nacsonline.com) is the international association for convenience and fuel retailing. The U.S. convenience store industry, with more than 151,000 stores across the country, posted $696 billion in total sales in 2013, of which $491 billion were motor fuels sales. NACS has 2,100 retail and 1,600 supplier member companies, which do business in nearly 50 countries.

On the surface deflation sounds wonderful. Rather than rising prices, deflation results in declining prices.  In this way, purchasing power rises, effectively giving everyone a pay raise.  Better yet, deflation is accompanied by near zero interest rates making borrowing cheap.  What on Earth could be better!  It turns out, almost anything.

When people expect falling prices, they wait as long as possible before making large purchases, such as a car or a house because the longer you wait the cheaper the item becomes.   Similarly, deflation breeds a strong desire on the part of households and firms to hold cash as it continually appreciates.  By contrast, inflation creates an incentive to spend since cash falls in value over time.

Deflation is not simply falling prices, which can be good, but is also characterized by falling wages, not so good. In a deflationary environment, due to a lack of demand for goods and services, firms fight for market share by slashing prices.  By doing that, total revenue falls, forcing firms to pay workers less.  However, since reducing wages of existing employees is hard, companies first hire fewer workers, then lay workers off, which leads to stagnant wages and eventually rising unemployment, which forces workers to accept lower wages.

Deflation also creates a reluctance to borrow, since loans have to be repaid in future dollars that are worth more than those borrowed. Think about it – if you have a mortgage payment that is $750/month and inflation is 4%/year and your income keeps up with inflation, your mortgage payment becomes a smaller and smaller percentage of your monthly income.  But if deflation is 4%/year and your income falls by that amount each year, that $750 mortgage payment can quickly loom large and dramatically crimp spending.

As a result, borrowers find that the real amount of their debts rise over time. In response they save more to compensate and in the process spend less.  Of course, lenders are better off, but they do not increase their spending by as much as debtors decrease theirs.  As a result, overall spending levels decline more.

Exacerbating this problem, in a deflationary economy banks have little incentive to lend, as the only way to entice borrowers is to offer negative interest rates. But in this case, the more banks lend, the more they lose.  As a result, banks do little lending, firms struggle to grow and many of both fail, causing wages to fall.  In the end, consumers buy little more than essentials and everyone holds on to as much cash as possible.  Not a pretty picture.

Lastly, deflation makes it essentially impossible for central banks to set interest rates low enough to stimulate demand. While central banks can set rates at 0%, it’s hard to get below zero.  With inflation of 3%, a zero interest rate is a -3% real interest rate.  But with -1% deflation, a central bank would have to offer an interest rate of -2% to achieve the same -3% real interest rate.  While theoretically possible it’s impossible in practice.

Because of chronic falling wages, reduced spending and limited lending, deflation is something to be avoided. Once it takes hold, it’s inordinately difficult to get rid of.  Japan has been struggling with deflation for decades and is now employing desperate measures to eliminate it, with limited success and high costs.  We don’t want to wind up like Japan.

Elliot Eisenberg, Ph.D. is President of GraphsandLaughs, LLC and can be reached at Elliot@graphsandlaughs.net.  His daily 70 word economics and policy blog can be seen at www.econ70.com.

The upcoming P&CMA General Membership Meeting is packed with information important to our industry and your business but specifically, our Educational Seminar being held on Wednesday morning at 9:30 a.m featuring the Alabama Department of Agriculture and Industries, Weights and Measures Division.    

New Pump Calibration Regulations Became Effective October 1, 2014

Effective October 1, 2014 owners of motor fuel pumps in Alabama are responsible for annual calibration testing and reporting the results of these tests to the Department of Ag & Industries Weights and Measures Division. Over the past several months the association has worked with the Department in their efforts to draft and develop these regulations and create the on-line reporting system that will be used.

This system will be going live around November 1, 2014 with pump owners responsible for the initial calibration testing and reporting before September 30, 2015.

Join P&CMA at our December General Membership Meeting as the Department of Ag & Industries Weights and Measures Division representatives explain all of the details of the new regulations and demonstrate the on-line reporting process that will be required.

In addition, Department representatives will be available for a Question and Answer period for any and all questions pertaining to Weights and Measures regulations and inspections.

If you own, or are responsible for the operation of, motor fuel pumps in Alabama this is a CAN’T MISS EVENT.

This seminar is included in your two-day General Membership Meeting Registration or you can register for a one-day registration which will include the Membership Breakfast featuring Gary J. Palmer, Republican Nominee for US Congress and the above mentioned Educational Seminar.    Click here for more information and a meeting registration form or visiting our website www.pcmala.org under events or contact the association office at 334-272-3800.

For hotel reservation at the Hyatt Regency (Wynfrey) Hotel, call 1-800-996-3739 and mention you are with P&CMA to receive a discounted rate. Hotel reservation cutoff date is Sunday, November 9, 2014.

ADA COMPLIANCE UPDATE SEMINAR  – WHAT YOU NEED TO KNOW TO AVOID FRIVOLOUS LAWSUITS

Spaces available so sign up today!!

Presented by:

H. Dean Mooty, Jr., Mooty & Associates, PC and Federated Insurance

Wednesday, October 15, 2014

Associated General Contractors Building,  Meeting Room 3

5000 Grantswood Drive

Birmingham, AL 35210

Registration begins at 9:30 – Seminar from 10:00am -12:00pm

Cost is $30 per person

P&CMA has received numerous reports from members who have been sued for technical, although minor, violations of the Americans with Disabilities Act. Join us as we review the building code requirements of the ADA, educate property owners and retailers on conditions they need to address to avoid frivolous lawsuits, and explain what to do in the event you are sued.  The registration form is attached.  E-mail completed form to lcoker@pcmala.org, fax to 334/272-3837 or mail to P.O. Box 231659 Montgomery, AL 36123-1659 with a check or credit card information.

ALEXANDRIA, VA — Economic optimism rebounded sharply in September, with 47% of gas consumers saying that they were optimistic about the economy, the highest level of optimism in 14 months.

Optimism increased 8 percentage points from August’s 10-month low of 39%, and also is 8 points higher than optimism a year ago (39%).  A majority of consumers ages 18-34 are optimistic (56%), as are consumers in the West (51%).

The 8-point increase overall in optimism was the largest recorded since January 2013 when the National Association of Convenience Stores (NACS) introduced its monthly NACS Consumer Fuels Survey to examine how gas prices affect consumer sentiment.

Nearly 9 in 10 consumers (87%) say that gas prices, which they report have dropped 20 cents per gallon over the past two months, have an impact on their feelings about the economy.

“We have seen increasingly wide swings in economic mood over the past three months as consumers continue to sort out how world and national events could affect their economic security. At the same time, it appears that what happens at the corner store with gas prices continues to play a major role with consumer sentiment,” said NACS Vice President of Strategic Industry Initiatives Jeff Lenard.

As sentiment about the economy continues to swing haphazardly, consumers are divided on how sentiment translates into spending. While 22% of consumers say that they will do more shopping over the coming month, another 22% say that they will do less shopping. Not unexpectedly, younger consumers say they will drive any sales increase; 38% of those ages 18-34 say that they will do more shopping this coming month, compared to only 12% of those 50 and older.

While it remains to be seen whether optimism will hold or translate into spending, consumers say that they have tangible signs that they are getting more value for their dollar. Miles per dollar spent at the pump increased 2.3% to a six-month high of 6.8 miles per dollar, according to consumers’ self-reported gas prices and gas mileage estimates.

NACS, which represents the convenience store industry that sells 80% of the gas sold in the country, conducts the monthly consumer sentiment survey to gauge how gas prices affect broader economic trends. The survey was conducted by Penn, Schoen and Berland among 1,110 gas consumers on September 3-4, 2014. Summary results are at www.nacsonline.com/gasprices.

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Founded in 1961 as the National Association of Convenience Stores, NACS (nacsonline.com) is the international association for convenience and fuel retailing. The U.S. convenience store industry, with more than 151,000 stores across the country, posted $696 billion in total sales in 2013, of which $491 billion were motor fuels sales. NACS has 2,100 retail and 1,600 supplier member companies, which do business in nearly 50 countries.