The UK downstream oil sector comprises over 200 companies involved in the refining, distribution and marketing of petroleum products.
They range from oil companies, which are members of UKPIA, supermarket chains, independent retail groups, through to the independent retailer with one site.
The market is split into commercial and retail sectors. The commercial market includes power generators, industrial, transport (aviation, marine and road) and agriculture customers, independent fuel distributors (transport & heating fuels), the Government and its agencies, public services and the military. The retail market covers fuels mainly sold from filling stations.
The market for transport fuels in the UK amounts to about 53 million tonnes per year, equivalent to about 49 billion litres. Demand for road transport fuels equates to 56 million litres of petrol and 68 million litres of diesel per day. Other than jet fuel, the market for transport fuels is mature with little overall growth in demand and in the case of retail fuels sold on the forecourt, this sector is virtually stagnant having grown by 1% since 1999. Sales of petrol currently represent 43.9% of road transport demand by litres sold, whilst sales of diesel now represent 56% of total demand.
The members of UKPIA run the major oil refineries in the UK and they also market a wide range of petroleum products.
Over the last 18 years the retail sector has undergone a major shakeout with the number of filling stations declining from 18,000 sites in 1990 to just 8,613 at the end of 2013. This has been driven by a number of factors including the entry of supermarket groups into the market which, with the development of the out-of-town store and filling station, have captured over 41.6% of the total retail fuels market by 2013, which has increased from 11% in 1992. Petrol retailing has become a high volume, low margin business and increased competition, particularly from supermarkets, has squeezed margins.
|No. of Sites |
|Company Owned |
|% of Total |
|Av. Site Throughput |
|2013 ||8,613 ||1,927 ||22.4% ||4.86 |
|2012 ||8,608 ||1,600* ||19% ||4.62 |
|2011 ||8,706 ||2,210 ||25% ||4.78 |
|2010 ||8,787 ||2,216 ||25% ||4.68 |
|2009 ||8,921 ||2,229 ||25% ||4.28 |
|2008 ||9,264 ||2,190 ||24% ||4.01 |
|2007 ||9,430 ||2,191 ||23% ||3.99 |
|2006 ||9,526 ||2,225 ||23% ||3.93 |
|2005 ||9,726 ||2,391 ||25% ||3.82 |
|2004 ||10,351 ||2,722 ||26% ||3.63 |
|2003 ||10,535 ||3,041 ||29% ||3.45 |
|2002 ||11,425 ||3,805 ||33% ||3.28 |
|2001 ||12,201 ||3,966 ||33% ||2.99 |
|2000 ||13,043 ||4,295 ||33% ||2.87 |
|1999 ||13,716 ||4,470 ||33 ||2.73 |
|1998 ||13,758 ||4,713 ||34% ||2.71 |
|1997 ||14,824 ||4,775 ||32% ||2.51 |
Source: Experian Catalist (2005-2013); Energy Institute Retail Marketing Survey (1997-2005)
This fierce competition has forced most fuel retailers to concentrate on large volume throughput sites with modern forecourt and shop facilities. Independent retailers usually have agreements with oil companies to sell fuel under the brand of the oil company.
By law these arrangements have a number of restrictions imposed by the Office of Fair Trading, including one that limits the "tie" to a particular company to a maximum of 5 years. Although the rate of decline in the number of filling stations is likely to slow in coming years, fierce competition in the retail market is unlikely to abate so continued consolidation or even withdrawal from the market is likely to be a feature.