Convenience Store News

FEB 2017

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42 Convenience Store News | FEBRUARY 2017 | WWW.CSNEWS.COM EXPERT'S VIEW The new head of the EPA, Pruitt, comes from an oil and gas state and has been clear about his opposi- tion to the increased use of ethanol and other biofu- els in the U.S. fuel supply. He has called the current Renewable Fuel Standard (RFS) totally unworkable. Carl Icahn, the newly appointed special advi- sor to President Trump on regulatory reform, is the controlling stockholder in the merchant refiner CVR Refining and also a vocal advocate for reforming the RFS. According to Icahn, the RINs market that was created as part of the Renewable Fuel Standard is full of rampant fraud and abuse and the market dis- tortions it causes are driving the entire independent refining industry in the U.S. into bankruptcy. However, Trump expressed his full and 100-percent support for the current ethanol mandates while cam- paigning in Iowa and other corn-producing states. How President Trump decides to settle this obvious conflict within the administration could have a major impact on the motor fuels market in the U.S. and the competitive advantage the current RFS system has offered many of the largest marketers in the country. If President Trump decides to actually reform the RFS in a way that leads to a collapse in current market value for RINs credits, the pricing and wholesale margin advantage many of the leading M&A players in the C&G industry have enjoyed over the past several years could start to disappear. Finally, it will be especially interesting and important to see how the new president's stated goals of reversing most of the Obama Administration's regulatory agenda that has impacted the entire petroleum industry and further expanding energy production in the U.S. will impact the worldwide market price for crude oil. IN CLOSING A single article cannot cover all the policy initiatives that the Trump Administration is expected to focus on in the coming years that will impact our industry and its ongoing consolidation. Most importantly, given President Trump's unconventional approach to cam- paigning, interacting with other public officials and communicating with the American people, we may all be in for a wild ride. CSN John C. Flippen Jr. and John Sartory are managing directors of Petroleum Capital and Real Estate LLC ( The firm provides buy- side acquisition, refinancing, capital restructuring, and select sell-side advi- sory services in the convenience and gas industry. PetroCapRE has assisted clients in completing transactions valued at more than $2 billion. They can be reached at [email protected] and [email protected] Editor's note: The opinions expressed in this column are the authors' and do not necessarily reflect the views of Convenience Store News. certainly use a forceful advocate in the executive branch of government to publicly speak about the neg- ative economic implications of higher minimum wage laws. The progressive forces in the U.S. are currently winning the minimum wage debate all over the country. For example, the voters in the very red state of Arizona passed a $1.95 increase in November. The increase, which went into effect on Jan. 1, brought the state's minimum wage to $10 an hour, one of the largest one- time increases ever enacted in any state. One of the first tests of new Labor Secretary Puzder's influence in the Trump Administration will concern the revised federal overtime rule the Obama Department of Labor approved in 2016 that nearly dou- bled the salary threshold from its current $23,360 to $47,476, under which virtually all workers will be eligible for time-and-a half pay starting in 2017. The overtime rule has a real economic impact on the C&G industry in particular. Its implementation was tem- porarily blocked nationwide in November 2016 by an injunction ordered by a U.S. District Judge in Texas. President Obama's Department of Labor filed an appellate brief with the U. S. Court of Appeals for the Fifth Circuit to overturn the injunction. An oral argument on the case was scheduled for shortly after Trump took office on Jan. 20. Puzder has written extensively about the negative impact of the new overtime rule, and the business community is expecting that the Trump Administration will decide to drop the current appeal and let the injunction stand until a total review of the new labor regulations the Obama Administration has pro- posed or passed has been completed. If Puzder's views prevail, this will be very bullish for the C&G industry and should help to restrain the growing cost of skilled labor. However, is the new pres- ident who ran on a populist platform going to stop mil- lions of American workers impacted by this new rule from receiving a much anticipated wage increase? One thing President Trump has proved since he announced his candidacy is his unpredictability.

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