The issues with the UK refineries covered in my last review in June 2012 have all settled down and the final closure of Coryton (leaving only seven operational refineries in the UK) has happened with hardly any noticeable lasting effects.
There have been two major reviews of the market in the past year. The Department of Energy & Climate Change (DECC) commissioned a report from Deloitte on the retail fuel market with an emphasis on the resilience and security of retail fuel supplies. While some, including the PRA, dismissed the final report as a 'whitewash', it gave the present situation a clean bill of health.
In addition, last November the Office of Fair Trading (OFT) called for evidence of 'wrong-doings' in the industry. It determined that the industry was working well and was not disadvantaging the final consumer, and therefore there was no need for a full investigation.
As part of its preliminary investigations, the OFT was even able to debunk the so-called 'rocket and feather' theory that forecourt prices go up like a rocket and come down like a feather. They managed, through the use of complex mathematics, to prove that the opposite was true and that it took longer for price increases to pass through to the consumer, and that prices came down quickly because of competition.
For some reason the press failed to pick up on this as a story and so despite proof to the contrary the 'rocket and feather' principle with respect to prices on the forecourt is still firmly in the consumer's mindset. Last but not least as we go to press, the EU antitrust regulator is carrying out an investigation into alleged oil price fixing, and who knows where this may lead over the next few months.
Ask any member of the public and they will almost certainly have a go about the price of fuel on the forecourt and how much it has gone up. However, if you look at the chart on page 29, you will see that the pump price has gone down by 6.5ppl 7.5ppl over the past year (May 2012 May 2013) and that retail prices have been relatively stable around a range +/-5ppl for the past two years.
This was helped by the fact that the Government has steered away from increasing tax and duty over the past two years and it looks likely to continue with this policy until at least the next election. In March the Sunday Times produced statistics that showed the annual fuel costs of running an average family car have not changed since the 1970s, and as a percentage of the average household income, the costs have almost halved. In 1973 the adjusted annual fuel costs were £1,508 (13% of average household income) and in 2013 the adjusted annual fuel costs are £1,422 (7.8% of average household income).
Despite the harsh economic climate and the focus on fuel prices, the forecourt and convenience sector has remained generally positive over the past year. There has been much made of falling fuel volumes but the official figures from the Government show deliveries of motor fuels (petrol and diesel) for the full year 2012 were only 1.1% down against 2011 levels. This continued the trend from 2010/2011 which was 1.2% down on the previous year.
Behind the 2012 full-year figures is a 3% increase in retail diesel volumes and a 4.7% decrease in petrol volumes. At the macro level the combined effect of fuel efficiencies, environmental legislation, fuel prices and social trends is having an impact on total fuel demand, and the question will continue to be by how much and how fast will demand fall away over the coming years.
From a property perspective, forecourt and convenience values are continuing to hold up better than in most other sectors. Compared to high street retail, the forecourt sector has performed well and there have been no significant financial failures among the major players in the industry.
Another sign that the industry is in a reasonably healthy position is that over the past year we have again recorded a low net number of closures a net 87 closures compared to 88 in the previous year. The total number of open sites declined from 8,677 to 8,590. The actual number of closures followed exactly the same pattern as the previous year. There was a total of 187 closures 24 oil company owned and 161 dealer sites. These closures were primarily from unbranded (45), Texaco (18) and 13 each from Murco and Gulf. In the oil company owned sector 13 of the closures were from the Esso network.
We recorded 61 new-build sites over the year 46 by the major multiple retailers (almost one new supermarket forecourt every week); 12 new dealer sites and three new oil company owned sites including the new Shell-branded M25 motorway service area at Cobham in Surrey. In addition 40 sites reopened after a period of closure.
One significant difference to the previous year was the number of sites changing from oil company owned to dealer owned 166 in the past year compared to 19 in the previous year. More than 70 sites each for Esso and Rontec (Total), 13 for Shell and six for BP moved into the dealer sector. The net result is that the number of dealer sites is 5,187, just nine down on the previous year. We also recorded that almost 750 sites changed fuel supplier brand over the past year.
Compared with the Forecourt Trader Fuel Market Review 2012, UK site numbers have declined by a further net 87 sites, and there are 8,590 open retail sites with an average fuel volume of more than 4.1mlpa; and shop sales of £4.3bn an average of £10,500 per week from an average 65sq m shop.
Nearly one third of the 5,187 independent dealer sites in the UK are operated by dealer groups with three sites or more. The average dealer site now sells 2.2mlpa and turns over £9,000 per week through a 63sq m shop. With more than 15% (1,315) of the sites, the major multiples have gained further market share. They now control 40.5% of motor fuel sales (38.7% last year) and they are the single largest sector. The dealer sector has not changed since last year with 60% of the sites and a 32% motor fuel market share. The oil company owned sector now has less than 25% of the sites and is also down to less than 27.5% market share.
The regional breakdown of the forecourt sector continues with the market dominated by the South East, which continues to have almost a quarter of the sites and 30% of the UK's motor fuel, with 34% of forecourt shop sales concentrated there. Northern Ireland has the smallest regional market, but there has been a lot of activity in the past 12 months with new sites entering the market and the number of open sites has increased. As a vote of confidence Maxol is investing £40m in its network across Ireland.
Market shares and brands
As expected Rontec (Total) is the biggest loser over the past 12 months (-144) and Shell is the biggest gainer (+193) as it completed its programme of rebranding the sites acquired from Rontec. All the major multiple retailers added sites into their network over the past year, as did BP (+36), Esso (+22), Murco (+14) and Harvest Energy, which added 24 sites taking its total to 107. Other than Rontec the biggest losers were Texaco (-56) and Jet (-15), The unbranded sites remain at just over 700 but they are most vulnerable to the continued squeeze on margins and to the pressures on the environmental factors surrounding forecourt operation.
In the dealer sector GB Oils supplies the most sites with 993, followed by BP with 893 (+24), and Texaco has slipped to third with 819 (-56) sites. Esso was the largest gainer of dealer sites this year (+103) as it moved a number of tranches of its company owned sites into the dealer network with EuroGarages and MRH. In terms of motor fuel market share in the dealer sector, BP leads the way with 29.4%, Texaco is next with 19.2%, followed by GB Oils with 12.5%.
At this year's Forecourt Show Greenergy officially announced what had been expected for some time that it would offer fuel supply to the independent dealer sector with a slate of optional forecourt brands including Esso, Nisa or ST1 under its 'freedom to choose' campaign.
At the Top Indies Dinner, the Greenergy CEO Andrew Owens declared that "the age of the independent dealer is upon us". Also at the Forecourt Show Harvest Energy announced the option of using the Spar brand across the forecourt as well as on the shop. We will have to watch how this develops over the next 12 months, but it is clear that unbranded white tankers on the forecourt will be a more common sight in the future.
Overall the forecourt shop sector has reduced only slightly to £4.2bn sales per year in the UK. Similarly to last year, in the dealer market shop sales are more than £2bn per year (almost 48% of the forecourt shop sales sector). Within the dealer sector 85% of sites have a shop and 24% of the sites (1,110) have a full c-store.
This year we have added a new table showing sites by their forecourt shop fascia. The Tesco shop fascia leads the way on 680 sites (including the Esso/Tesco alliance sites as well as the shops on their own forecourts), and they have almost 17% of the £4.2bn forecourt shop market.
Spar is next, being the main symbol fascia on almost 600 forecourts and achieving a 10% market share. Third is the Shell Select fascia with almost 500 sites and a 7% market share. At the other end of the scale more than 20% of forecourt shops (1,661) have no brand on their forecourt shop. In terms of regional distribution, the South East dominates with 34% of forecourt shop sales and no other region has more than 9%.
Finally some of you may have noticed there is some juicy goings on in Birmingham if you are on the Smallheath Highway you have a choice between filling up at Lime or Applegreen.