Aspects of UK crude Oil Market - Report

DEVELOPMENT IN OIL AND
GAS RETAIL INDUSTRIES
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TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................3
Key changes in the UK petroleum retail market.........................................................................3
Number of petrol filling stations closing down in the UK how many have closed down up until
now and why................................................................................................................................4
Consumer behavior and buying patterns how people behavior has changed to from 1970's to
2015-16 regarding transportation ................................................................................................5
Change in the UK downstream supply sector .............................................................................6
Ownership structure of the petrol filling stations (pfs) effecting the rural dynamics and urban
dynamics......................................................................................................................................6
Link between PFS closing and the oil consumption increasing in the UK..................................7
CONCLUSION ...............................................................................................................................8
REFERENCES ...............................................................................................................................9
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INTRODUCTION
The petroleum retail market of the UK includes operations such as sales of fuel including
diesel and petrol to consumers and corporate via petrol filling stations network. This market has
passed a number of potential changes from past decades (Inkpen and Moffett, 2011). The report
herewith is going to represent the marketing and retailing aspects of UK crude oil market.
Further, the ownership structure of petrol filling stations (pfs) effecting the rural dynamics and
urban dynamics are discussed.
Key changes in the UK petroleum retail market
The major change is the market is that the number of PFS (Petrol filling stations) have
been declined as the investigation carried out by Chorley (2013) found that number of PFS have
declined as more than 75% of PFS have closed in 40 years. In addition to that, Report presented
by Deloitte in 2012, found that PFS have declined from more than 37500 in 1970 to less than
9000 in 2011. The study further revealed that in 2001 there were 12258 PFS in UK that have
declined to 8677 in 2011; hence, approx 29% decrease has seen. However, in the last five years,
trend closures of petrol filling station are declined to some extent. In the line, it has been found
that approx 6% decrease is witnessed during the period (Deloitte, 2012). This is to be noticed
that PFS closures major comprise independent dealers-owned as well as company owned PFS.
Moreover, it has been noticed that in the United Kingdom hypermarket-owned PFS are
continued to grow in upcoming years. From the investigation, it has been found that the growth
of hypermarket-owned PFS is significantly related to the growth of grocery store business within
UK. In the cited industry, hypermarket owned PFS generally sells high volume of petrol and
diesel and these entities also have high position as compared to independent and company owned
fuel stations. The report, in this way carried out the fact that in present position hypermarkets
owned PFS have captured higher market share as compared to other two owned PFS (Deloitte,
2012).
According to the report, in 2011, hypermarkets had captured 39% of market share in total
fuel sales however their number of market share of PFS was just 15%. In this way, it can be said
that a major change in the UK petroleum market is that hypermarkets have captured higher
market share in petroleum sales via their petroleum filling stations. The next key change in the
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market is witnessed as many independent dealers are facing high pressure in their business
models. The major reason behind this problem is the leading competition from hypermarket
dealers. Still, these entities are facing competition from company owned sites in terms of fuel
prices, however, it exists only to a certain extent. The petroleum retail market of the UK is
evident with a continuous demand for convenience store sales. In this aspect, non fuel sales have
become increasingly important in making PFS as a viable business model. For larger players,
non fuel sales is coming up with growth opportunities and has also leaded to significant
opportunities for independent dealers as through this, economics of scale are to be developed at
the similar time compelling convenience store offering at their PFS sites (Deloitte, 2012). Over
the few decades, in petroleum retail market of the UK some rationalisation of distribution
terminals as well as secondary distribution networks is evident that are outstanding major
distribution challenges. However, as a result, efficiency and cost saving in the sector has been
evident but with a signification rate of PFS closer, there is also seen a reduction in spare capacity
in systems.
Acquisition of crude oil in UK, Transportation, marketing and retailing
There is a significant fall that is witnessed in oil prices since mid-2014 which lead to
increase the overall UK economic activity. This all has done just because of declining cost of
production for businesses, especially for those areas which are heavily dependent on oil inputs.
Nonetheless, it has been witnessed that the oil and gas extraction sector is adversely affected by
the reduction in oil price. In the UK, there are number of oil companies which are members of
UKPIA. The market is operated by large supermarket chains, companies and independent retail
groups. From secondary investigation, it has been evident that UK crude oil market is split into
commercial and retail sectors. The commercial market consists of power generators, industrial,
transport (aviation, marine and road) and agriculture clients, regulatory bodies and independent
fuel distributors. On the other side, retail market covers fuel that is primarily sold from petrol
filling stations. Recently, fuel retailing market has evident with high volume and low margin
business in which competition has been increased especially from supermarkets that have
squeezed margins. In concern to the marketing of crude oil, the fierce competition has forced
most of the fuel retailers to concentrate on large volume throughput sites along with the modern
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