By Keith Reid
Star Oilco has deep roots providing various fuel to its customers. The type of fuel provided is dramatically different today than it was over 80 years ago, and, in fact, the products it carries and distributes are not all that common today among its peers.
The initial products sold were sawdust, coal and wood. Today the company has a strong diesel and commercial focus, distributing diesel, biodiesel, renewable diesel, off-road diesel (dyed diesel) and to a lesser extent, gasoline. It operates cardlock sites, heating oil delivery, bulk fuel, on-site mobile fueling service and a single Shell retail site that does heavy diesel business.
While not a huge operation, Star Oilco President Mark Fitz noted that being smaller can mean being better. “I notice a lot of the larger marketers don’t really know their operations that well,” he said. “You have the salespeople, the transportation piece and then the management and there are chasms between them. Where we’ve grown is based on the ability to see where I need to pull those areas together.”
The company was originally founded in 1936 by D.B. Pruitt as Franklin Fuels. Franklin Fuels, like many energy companies of the era, had a foundation in coal and given its location, sawdust and chopped wood. The lumber mills would give away sawdust which could then be used in sawdust furnaces. The work involved shoveling dry sawdust into a hopper that would then gravity feed into the furnace.
While it was good business, neither sawdust nor coal were fuels of the future. Pruitt attended a class offered by Texaco that showed how you could replace the sawdust furnace door with an oil burner assembly and convert to heating oil. The company moved into oil with Texaco as its vendor and the name was changed to Star Oil Co. to reflect the Texaco star.
The Fitz family got started in the business when his father returned from Vietnam with his poker winnings. “My dad (Michael Fitz) was attached to a special forces unit and was authorized to use the special forces officers’ club. He wasn’t a great poker player, but he told me that if you wanted to play a winning game of poker, play with people who tend to be impulsive, love risk and go all in.”
Fitz bought a one-truck heating oil company, Willoughby Oil, in 1972, which he had doubled in size by the time he bought out D.B. Pruitt in 1976. He gradually acquired another company, Oilco, throughout the 1980s. The company then became Star Oilco. “The owner, Joe Kent, was a huge pioneer in cardlock technology,” said Mark Fitz. “In fact, he paid programmers to make some early card punch technology that was licensed to Pacific Pride when they started their business.”
Mark Fitz started in the family business after serving enlisted in the Army, Army Reserves and Air National Guard in the 1990s and subsequently graduating from college in 2000. In fact, it was in the ANG where he first became exposed to biofuels, which are a central component of his business today.
“I received my education in fuels working in a (ANG) fuel lab,” said Fitz. “In 1996 I was sent to a tech school in Texas and they were saying, ‘you may come across this new thing called biodiesel. The Navy is testing it in Illinois, and they’re going into it.’ Since the moment I heard that I was just captivated by the idea of fuel not made from petroleum. And I was going to college in Alaska and getting an economics degree, and there was a lot of emphasis on oil.”
Mark’s opportunity to take over the business came with the downturn of 2008. Times were tight. He was able to buy out the business and assume the risk. Among his initial initiatives were dropping a lubricants division and a profitable HVAC operation that complemented the heating oil sales.
Star Oilco first moved into liquid fuels with heating oil, and it continues to serve those customers today. However, the market has certainly changed over the decades.
“There used to be dozens of companies distributing heating oil and at least a half dozen terminals specializing in heating oil,” Fitz said. “And now there are three good-sized companies, including us, and a number of small one-truck operations.”
The decline has been somewhat beneficial to Star Oilco.
“We’ve been growing our heating oil slightly—more than our attrition—based on people going out of business and there not being enough drivers,” Fitz said. “But I wouldn’t expect that to be here in 20 years.”
Aside from heating oil and the single retail site, the core of Star Oilco’s business revolves around traditional fuel hauling and commercial services.
Star Oilco operates a fleet of 14 vehicles, five of which are fuel hauling tankers which make up the core of a common carrier service. Star Oilco serves the Pacific Northwest centered on Oregon and Washington as a common carrier, while covering both states completely as a mobile on-site fueler. From a product standpoint, Star Oilco strongly favors diesel over gasoline and commercial over retail, however, it does haul gasoline for some friendly competitors that need truck capacity.
As with any fleet operation, driver retention is an enormous issue.
“You work at it every single day as a core competency. There are some years where it’s like you are on a treadmill of turnover,” Fitz said. “I’ve discovered it’s best to look for past loyalty when hiring. And then, if they’re loyal people and they’re looking for work—what’s the reason they are making a change? HAZMAT generally brings better pay and benefits and they’re home every night, so what is it that they are looking for?”
He noted that a lot of companies make promises about accommodating specific needs but fail to deliver. “Say you find someone with a childcare need that their previous employer is not meeting,” Fitz said. “If I can find a way to take care of that need, they will be with us at least until their kids are in high school.”
Similarly, Fitz noted that many operations skirt Department of Transportation (DOT) rules and create a grinding work environment. “They’ll go a month without a day off, things like that,” he said. “You’re definitely getting one day off a week for your reset and we’re aiming for two unless you want those hours, and everyone’s agreed to it.”
Fitz has a CDL, and he will fill a seat when needed.
“We must have trucks on the road on Christmas, Thanksgiving, New Year’s… unless somebody wants those hours, I’ll be there,” he said. “Stepping in when it sucks to be driving can be a pretty big deal. I’m prior Army enlisted and that’s the way Army leadership works.”
Another aspect of military service—a sense of purpose—also translates into attracting and retaining not just drivers but quality employees throughout his operation.
“A lot of companies are having trouble attracting good people,” Fitz said. “And that’s because there’s a lack of a sense of purpose. We instill a sense of purpose, and I’ve been very fortunate that the people we hire embrace that sense of purpose and take pride in what we’re doing.”
Star Oilco operates four trucks that wet hose fuel at night. Fitz appreciates this as a higher-service, higher-margin component of the business. In addition, the company has three trucks on the road in the morning doing jobsite fueling, heating oil, generators and refrigerated trailers.
“I love fueling refrigerated trailers,” Fitz said. “Most people hate it. I just love the little stops with the high margin. And it’s about being there consistently—set a watch to it. It’s interesting how many people in our industry fail at that.”
“Our drivers have every one of the customers’ vehicles memorized,” Fitz said. “They know the guy who’s there in the shop at night. They know where they are parked each day.”
However, that doesn’t mean that issues don’t arise from time to time. Fitz approaches this from the angle that people usually have the best of intentions, but sometimes you have a communication problem.
“We had a customer who kept complaining that we didn’t get a certain loader,” said Fitz. “So, I started, doing their stop. I was just looking all over for it and I’m walking around with a flashlight, and then I found it.”
The loader was parked inside of a building on top of a mountain of shredded wood, and the driver would just jump out at the end of his shifts.
“It was the most dangerous place on the site,” said Fitz. “I come back to them and say, yeah, we missed it, but you don’t want us to fuel it and I’ll explain why. And they came up with this idea where they painted a yellow line and all equipment must be parked on that yellow line at the end of the day. Then everything got really easy to service.”
As part of its service the company wet hoses diesel exhaust fluid (DEF) and charges for the labor. Two trucks have small DEF tanks and they run a route on designated “DEF days.”
Star Oilco operates Pacific Pride cardlock site and a CFN cardlock site. Both integrate well into the company’s mobile fueling operations.
“We focus on the standalone commercial card lock and not the retail fleet card business,” said Fitz. “We’re seeking a smaller fleet that’s locally focused and their big concern is fuel theft, and you’re helping them secure those cards. We believe, and our message to customers is, that you have more control and security with your drivers at a cardlock site than you do at a retail site.”
Where DEF is concerned, the company is in the process of adding bulk fluid service throughout its cardlock operation.
Moving into Biofuels
Mark Fitz’s path into the family business involved a negotiation over his desire to attend law school. It also opened the door to the company’s strong focus on biofuels. “My dad is not a fan of higher education, and he was not a fan of me going to law school,” he said. “But he really needed a salesperson and we came to an agreement. He would indulge me in law school if I came to work as a salesperson, and he would also indulge me in playing with biodiesel. He let me know it was guaranteed to fail and back in the ’70s… well, in 2007 we moved about 3 percent of the biodiesel in the United States.”
His view on the future of liquid fuels reflects his focus on biofuels.
“In our lifetime, gasoline will be obsolete,” Fitz said. “I think diesel will continue to grow but I think the future diesel will be renewable.”
For the Northwest, and the West Coast in general, the future of biofuels starts today. These areas, along with the Northeast and agricultural regions strongly support biofuel consumption through both public support and a range of regulations. And, incentives can make the fuel itself very profitable. For example, Fitz noted that Oregon had a program that waived the on-road fuel tax with B20 (20% biodiesel) or higher when the biodiesel was made from a low carbon yellow grease or waste vegetable oil feedstock.
The company currently distributes and offers through its fueling services biodiesel, renewable diesel and ethanol.
Most of the action is driven by California’s Cap-and-Trade Program and Low Carbon Fuel Standard and its spread though likeminded states and localities. This provides a carbon trading system and other incentives that make low carbon fuels more affordable or in fact profitable. Oregon and Washington, while not yet on board at the state level, are moving in that direction with several counties around Seattle making the move independently. These areas also have fleet operators willing to pay extra for biofuel solutions regardless of regulations.
“When it comes down to renewable diesel and biodiesel, the whole shooting match is markets that will pay for the reduced carbon value,” Fitz said. “The value is that they’re a lower carbon fuel, and if you want to grow a market for diesel, you must blend that for each additional gallon that you’re bringing into the state. So that’s pushing those values up.”
As already noted, Star Oilco has been into biodiesel for two decades. The company is now looking to gain a foothold with renewable diesel, which involves similar feedstock but a production process more in tune with that of petroleum diesel. Fitz sees it as being the “next generation fuel” that is perfectly suited to carbon markets while providing more direct compatibility with petroleum diesel as a “drop-in” substitute.
Ethanol has had a mixed reception where carbon is concerned out west. The California Air Resources Board (CARB) pushed back on corn ethanol from a total carbon standpoint. This generally centered on ethanol’s ability to increase evaporative emission and debates over the full energy cycle for production. In one development that Fitz highlighted, CO2 from ethanol production (located close to fracking areas) is liquified and used as a fracking solution that sequesters the CO2 in the earth. This lowers the carbon footprint of both the ethanol and oil/gas production.
“I think ethanol is an awesome American fuel,” Fitz said. “I can’t believe E85 isn’t everywhere. I beat my head against the wall for a decade trying to develop E85 and have one location. When gas was $4 per gallon in 2008 everybody was excited about it. Ethanol was $1.60 and you would sell it for $2 and everybody was excited about the price and we moved quite a bit of it. We have plenty of supply and plenty of flex fuel vehicles but now, people just aren’t into ethanol.”
Fitz is surprised that with gasoline prices creeping higher, E85 remains lagging. He noted that the one site he supplies with E85 has a customer base that appreciates E85 as a racing fuel, due to its enhanced performance in high-compression engines.
Ultimately, where does the company’s biofuels approach fit into its future operations?
“Everything is change and I will fuel that change,” Fitz said. “I would suspect that in the next few years they’ll be selling electric vehicles by the mile. There’ll be people who want the service taken care of and you’ll have a thousand startups without any ability to understand fleets, and none of the oil guys that understand that intimately will pick it up. Yeah. It’ll be weird and I’ll be the only guy and they will look at me like a freak.”