Forecourt Trader - 30 years at the heart of the fuel retailing community

Fiasco fuels alarm

03 April, 2007
While the rogue fuel is out of the system now, what are the long-term effects of last month's fuel furore?
Page 10 
Last month's furore over contaminated fuel brought some unexpected good fortune to many independent retailers, with increases in fuel volumes of as much as 40% or more being reported by some sites.
But that may not have been the only benefit. PRA director Ray Holloway believes the petrol retailing industry has been stood on its head for the first time ever, with the fortunes invested by oil companies in the quality of their fuel production and distribution management now beginning to be appreciated (even though some oil company sites were also affected by the contaminated fuel).Supermarkets on the other hand have been left somewhat tainted by the situation, with comments like "cheap and cheerful", and "you get what you pay for" having been given a lot of airtime on radio and TV as the extent of the problems emerged."Although motorists will undoubtedly flood back to the supermarkets, if anything goes wrong with their car subsequently they will think it's the fuel," says Holloway."All the media publicity highlighted just how many people do question the quality of the fuel they get from supermarkets. And what about the 5,000 or so motorists whose cars were damaged as a result of filling up at a supermarket - they're not going to forget that in a hurry are they?"It's the first own goal for the supermarkets - there is now a stigma attached to them - and they are going to have to look very carefully at their fuel quality management processes."If you build a business by attracting people into your store because the fuel costs less than anywhere else - implying that so does everything in your store - then if people get the idea the fuel is not just cheap, but of poor quality and likely to make your car break down, what does that say about the rest of the 'cheap' products in your store - that they're not good for you either?"While some independent retailers are wary of how the supermarkets will regain their status in the market, Holloway says it could be an interesting dilemma: "How can the supermarkets use price as a weapon when some motorists consider that cheaper petrol is the underlying cause of the fuel quality issue?"The supermarkets can't afford to take risks - if anything like that happened again, it would be a seriously damaging blow. They will have to invest more in quality control. Although the situation does beg the question, how would the country cope if a significant number of supermarkets faced closure for a period of time? After all, they account for more than one third of the country's volume..."In fact, Holloway believes the power of the supermarkets may have some relevance to the slow reaction by Trading Standards officers in dealing with the effects of the contaminated fuel: "I wonder if an independent forecourt operator would have been treated equally had their fuel tanks been suspected of dispensing contaminated fuel," he says. The questionable fuel had apparently been in the system for two weeks (since February 14) before any public accouncements were made. Even then there was denial to the point of arrogance by certain supermarkets, before the apologetic ads appeared in the national press."The PR management of this was appalling," says Holloway. "As part of the Retail Motor Industry Federation, we were aware of member garages complaining about the number of cars blocking up their sites, awaiting repair because they couldn't get parts. So there were all these days when cars were breaking down, motorists were suffering, and no one was saying anything."I noted the intervention of BP with particular interest as the company was clearly exasperated with the slow progress towards identifying the cause."Finally, but not until after Trading Standards had declared the silicon find in tests completed in Cambridge, was it announced that four storage tanks in the depot at West Thurrock held contaminated fuel."== future problems? ==While some retailers may be rubbing their hands, Holloway believes the incident does not reflect well on the industry as a whole, not just because of the delay in dealing with the issue, but because the forecourt fuels business has been brought under the microscope, and the integrity of petrol quality is being questioned by the motoring public. And with biofuels penetrating the market by stealth, giving rise potentially to further problems for both retailer and motorist (see column, right), he says the incident should be seen as a wake-up call for the industry."It's a call on all suppliers to be upfront with retailers about biofuel content - after all it's the first time for 100 years that we're fundamentally interfering with motor fuel as we know it."The maximum allowable bio content is 5% simply because the engine warranty is invalid if the fuel contains more than that. Suppliers get a 1ppl duty allowance on biofuel content - a gain for them and the reason they may not be upfront about it."Holloway says the major oil companies have not pressed the button as hard as they could have on biodiesel because of quality issues. But they are now following government pressure.----=== retailer viewpoint ===John DevineSherlodge Garage, which has two sites in Kent:"Our fuel sales definitely increased at the time, probably by as much as a third. But volumes have returned to normal very quickly. The supermarkets were very aggressive on price. Both Tesco and Morrisons dropped to about 2ppl lower than they had been before the crisis. I don't think we've held onto any significant gains. Those customers that go on price seem to stay on price."Mike DearingChatham Road Service Station, Maidstone, Kent:"There does seem to have been a lasting effect for us. We picked up a lot of volume initially and while some of that has now gone, we're still up by about 6-7%, and this seems to be steady. Obviously it's not just the fuel sales - the shop is also benefiting."The media coverage helped us a lot - it was all over the radio and TV that week. The comments we had from customers showed that people were very concerned. I'm confident that some of these people will now stick with us because of what happened. It will take a while for the supermarkets to totally regain customers' trust."We had posters up on the forecourt, supplied by BP, explaining that the fuel we sell is of the highest quality. Hopefully we can keep this in the forefront of customers' minds and retain the extra trade we've built up.""We haven't been affected by price-cutting, although I've seen it happening. Obviously the supermarkets will try to buy back their customers by just dropping the price on the pole sign. It all depends on whether or not people will now think the 2ppl saving is really worth it." Jonathan JamesJames Craven & Sons, which has three sites in Cambridgeshire:"We've seen some growth in volume - around 30% initially - although that does seem to be diminishing week on week. It's down to about 10% now and I think it will erode further. We are hopeful of holding onto some extra trade, but bearing in mind the nature of the beast we've taken it from, I don't expect the supermarkets to lay back and let us tickle their tummy. They will do something to regain the trade they've lost and probably try and take some more on top - that's what concerns me most. It was obviously a PR nightmare for them, but I'm sure they will try and spin it into a positive."While Tesco didn't cut its prices in the immediate aftermath, nor did it put prices up when everybody else had to. At one stage Tesco supermarkets were selling at about 4ppl below us, but the sites were dead. Now they have put the price back up."We tried to keep our prices as low as we could because we didn't want to be seen to be profiteering. I think the media did a good job in informing the public that the crude price had gone up because Tesco had to re-order volume to replace the contaminated fuel. It always amazes me that people forgive the supermarkets. If I run out of a product people whinge. If Tesco runs out the customer will say 'oh they must have been busy'. I think there's a tendency for people to think 'oh never mind they had a bit of a blip'."Susie HawkinsGloucestershire-based Simon Smith Group with six sites:"The affected sites weren't anywhere near our area, so we didn't see a huge difference. What was interesting was that it was the more rural-based sites that saw more of an uplift in the first week or so - we're not sure why. It may be that people had previously been going to supermarket sites outside their area and decided to fill up locally that week instead."We put posters up to reassure our customers at all our sites. But there were definitely people out there trying it on. We had one person claim that they'd bought contaminated fuel from us, but we were immediately suspicious because they only wanted to be reimbursed for the value of the fuel and not for any remedial work to their car. We refused to pay them and said that if there really was an issue with our fuel we would know about it. Although Total did have some problems, our tankers hadn't come from anywhere near the affected areas."----=== Problems with Biodiesel - by peter barlow ===Conspiracy theorists would have a field day with the information now seeping out bit by bit from the fuels sector on the growing number of problems which have been experienced with biodiesel. As with most motor fuel-related problems, petrol retailers, vehicle servicing workshops and motorists are involved to some extent or other.The immediate issues relate to four properties of biodiesel. Number one is that of biodegradability. Biodiesel can be attacked by bugs more easily than conventional diesel. It is four times more biodegradeable.Biodegradation requires the micro-organisms (always around in the air and on surfaces, their food); biodiesel; oxygen in air (though some bugs manage without); and a supply of water. But, to grow really rapidly, they need a nice warm environment. Biodiesel is hygroscopic - it absorbs water readily; in some conditions more than 40 times as much as the non-bio variety, so there is no shortage of water. With diurnal variations in temperature, dissolved water then comes out of solution as the temperature falls and settles to the bottom of the tank. Microbiological growth produces sludge and slime which can block filters, threatening not only the filters protecting dispensers but also those protecting vehicle fuel systems.The products of biodegradation are acidic and rapidly drive the whole system acidic, causing corrosion and sediment - corrosion which can put a hole in a steel tank. As for heat to encourage the biological chemistry, well, just consider the effect of warm diesel from the refineries which makes up the conventional diesel component of the biodiesel blend. Retailers in the North East, South East and Scotland have experienced bacterial problems and dispenser filter blocking with biodiesel. If the material gets through the dispenser filter drivers will also be affected.One Trading Standards officer recently reported that deposits on some dispenser filters have created a level of suction in the dispenser pipework which has split the filters, allowing the deposits unrestricted access to dispenser and engine components. But the deposits causing the problem do not have to be the result of microbiological attack. Harmful properties two and three also generate deposits. Biodiesel is a natural detergent as well as a good solvent for lacquers, gums and sediments which will have built up over the years in the tanks and pipework which have stored and distributed diesel. When exposed to biodiesel they are softened, loosened then dissolved or dispersed in the blend and carried over to the next fine filter.Lastly, biodiesel is thermally and oxidatively unstable, producing lacquers, gums and sediments through ageing more rapidly than petroleum-based diesel. Contact with copper, bronze, brass and zinc components will accelerate ageing and filter clogging.So here are the key messages:-? With biodiesel there is a great and immediate potential for damage if the distribution and storage systems are not clean and do not stay clean.? As retailers do not see the product delivered they cannot tell if they are being delivered biodiesel containing dispersed or dissolved contamination.? Micro-biological growth requires water so it is imperative retailers ensure their tanks do not have water bottoms. Prevention is better than cure. The price of a single tank inspection with an endoscope/CCTV is £500, while fixing a micro-biological problem at a large service station could cost £3,000.? Keeping tanks full will reduce the amount of condensation.? There is no legal requirement for suppliers to tell retailers when they are supplying fuel containing bio components of 5% or less by volume. Some suppliers have delivered diesel containing biofuel without advising the retailers concerned. It may well be that they have been adding fatty acid methyl ester in quantities lower than 5% to quietly flush their systems prior to adding higher concentrations.? In one instance a supplier did not advise a biofuel blender that a biofuel ester had already been added. The blender added a further 5% of ester with the result that the ensuing blend had a very high solvency and carried lacquer and sediment into retailers tanks and pumps with predictable results.? Retailers must insist they are told before biofuel is delivered so they have time to check that their tanks are clean and free of water and sediments. Otherwise if there is a contamination issue there will be no proof the contamination did not come from the retailer's own tanks.

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