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

Green with envy

05 December, 2007
Oil company contracts prevent retailers from selling 100% biofuels. Is this restricting you?
Page 19 
We're all been told to do our bit to clean up the planet, but what happens if you're keen to sell 'greener' fuels but your supplier isn't? In fact, what if the oil company slaps you with a ban and tells you that you're not allowed to stock biofuels at all? It doesn't sound very environmentally-friendly, especially in today's climate with the government encouraging us to increase our use of biofuels and cut down on fossil fuels.
Retailer Simon Hockings, director of AUK Investments and the owner of five BP-branded forecourts in the Lake District, recently found himself in this very position. Simon contacted BP in September to ask if he could sell 100% biodiesel at his Prizet North site on the A591 near Kendal. But he was disappointed when he was told no."I think it's a bit harsh that we can't do it," says Simon. "I can understand why BP has said no, after all we have a tie with them to sell BP fuels and it's a legally-binding tie. We're not allowed to source fuel from anywhere else. But if we were able to put in a pump that was unbranded we could source the biodiesel from somewhere else. It wouldn't put a major dent in BP's sales, but it would give customers who have a greener conscience the chance to choose biodiesel."Simon, who runs his forecourt business with his two brothers, adds: "I'd been thinking of writing to BP about this for a while, and by coincidence we received a letter from them advising us that we couldn't sell fuel from any other suppliers. But the letter also stated that there was the odd exception to the rule. Our plan was to store the fuel in a new separate tank and put in a separate unbranded pump, so I wrote back to BP and asked if we could please have permission to sell biodiesel in the Lake District. BP wrote back and said no because we had a contract with them."The letter from BP stated: "As you are aware, the conditions of your fuel supply agreement with BP is wholly exclusive. There are only a handful of examples where BP has, upon written consent, agreed to waive this exclusivity. As a general rule BP does not grant permission for dealers to source the supply of fuel from any alternate source." The letter detailed the government's plans to introduce the Renewable Transport Fuel Obligation (RTFO) next April, which will obligate suppliers like BP to make their fuel contain a minimum percentage of biofuels. It explained that BP had been preparing for the RTFO by trialing biofuel blends in the UK during 2007 and that the company intended to ensure all diesel delivered to its forecourts would be B5 biodiesel by April 1, 2008. It continued: "It is with this in mind, together with a lack of assurance on the stringency of quality testing by any third party supplier, that I cannot approve your request to source this fuel for sale."Simon still has two or three years left on his contract with BP, although he says the fact that he is not allowed to sell the 100% biodiesel does not mean he would consider leaving BP. The business, which has another site near Kendal, two near Windermere and a fifth connected to a Travelodge off junction 36 on the M6, was started by Simon's father in the 1960s. The company has been with BP for more than 20 years. "I'm more than happy with BP as a company, but I think it's a shame they won't let us sell the biodiesel," he says. "I imagine BP isn't the only supplier with this rule, but how are retailers who want to start selling greener fuels expected to do it? I understand BP isn't likely to start providing 100% diesel any time soon, so we're trapped really. Biodiesel will never replace the other types of fuel but it could definitely make up a share of the market. It would just be nice to have the choice."If Simon had got the go-ahead from BP, he was planning to source the biodiesel from a small company in Shropshire called Rocket Fuels, in which he has a business interest. The company, based in Bridgnorth, has been in the biodiesel business for about five years and mainly supplies hauliers who pick it up from the site. "It's cheaper for the hauliers and Rocket Fuels has a contract with one or two of them," explains Simon.The biodiesel he wanted to sell at his Kendal site would mainly have been aimed at the 'white van man'. "Our idea was to initially sell it to a couple of account customers on a trial basis, and have it restricted," he adds. "We wouldn't aim it at new cars - I suspect it wouldn't be covered under warranty - but I understand it's okay to use in older vehicles."According to BP, it does not allow retailers with exclusive contracts to sell biodiesel from other sources.A spokeswoman says: "The dealer does have an exclusive fuel supply agreement with BP which means he is unable to sell other brands of fuel on the forecourt. BP is working hard to bring biodiesel into the UK fuels' market at its forecourts in line with government requirements by April 1 next year to fully meet the RTFO. This means that after April 1, all diesel delivered to its forecourts will be B5 biodiesel. BP is committed to providing its dealers and its company-owned forecourts with the best possible fuels to meet customers' needs."BP is not the only oil company with this policy. Total UK says its dealers are under sole-specific fuel agreements, so are banned from sourcing other fuel from other suppliers. Similarly, Esso and Shell say their standard exclusive agreements require retailers to purchase from them.Chevron, however, would be willing to explore the issue. A spokesman says: "Retailers joining the Texaco-branded network do so because they want the benefit of a respected quality fuel supplier and, generally speaking, exclusive long-term supply agreements work well for both parties and protect the integrity of the brand. That said, should a retailer approach us with a strong desire for a fuel type not currently offered by us, we would investigate possible options in good faith. However, we would want to reassure ourselves that the specification and security of supply of any new fuel were of a consistent quality worthy of the Texaco brand."Ray Holloway, director of the Petrol Retailers Association (PRA), understands BP's stance regarding Simon's site. He says: "BP is correct to restrict the forecourt fuels offered to consumers to their products only. Clearly the forecourt has branded imagery and motorists can rightfully expect the quality to be befitting of that brand. The retailer signs a sole supply agreement so would be unwise to test the validity of the terms."Holloway says the 20p per litre saving on excise duty for biofuels must be very attractive to forecourt operators, but warns retailers to proceed with caution. He explains: "The retailer will have protection of an 'all risks' insurance policy, but if the fuel supplied by the contracted supplier is found to be responsible for engine damage or failure then the oil company will be responsible for the costs. The most recent example of this was in February when a fuel quality issue in the south east of England caused damage to vehicles. Also, no vehicle manufacturer will provide warranty cover against engine or other damage if the biofuel content is greater than 5%. The government may be stating ambitious objectives for raising the bio-content to 10% but many fuel quality and fuel management issues will need to be addressed first - not to mention the advancing of engine technology!"Holloway adds that because there is no official quality standard for biofuels, oil companies are bound to be cautious about allowing a 'guest' product on a forecourt.The debate over biofuels looks destined to run and run, especially as the government becomes increasingly vocal about tackling climate change. But as a final thought, Holloway isn't convinced the UK is putting these resources to their best use.He says: "One hundred per cent biofuel would provide better environmental benefits if the fuel was directed to industrial or domestic use. Fuel quality is not so critical in those markets and the 'new' oil will be replacing hydrocarbon fuels." ----=== Case study: Tony Barlow, The Mount Service Station ===One forecourt retailer who is blazing a trail in the biofuels area is Tony Barlow, from The Mount Service Station in Shrewsbury.Tony is an independent retailer who has an unbranded forecourt, so he is free to source fuel from any supplier. He has been selling B5 - 5% biodiesel content - fuel for five years and while he used to source this from Shropshire company Swan Petroleum, he recently started blending his own.Tony says: "When I need more B5 at the site, I pour 250 litres of vegetable oil - or B100 biodiesel, which is pure rapeseed oil - into the tank on a Monday night. And then I get a delivery of the ultra-low sulpher diesel on the Tuesday, and 5,000 litres of that goes in the same tank on top of the B100. It needs to be 5% vegetable oil in the tank, so I know I've got the right mix. I've been using biofuel in my own car for the past four years and I've never had any problems."I was happy with Swan but it is quite expensive, so that's why I decided to blend my own."Tony says he hasn't had any complaints from customers.When he started selling the biofuel he didn't know what to expect, but he found it had many benefits for vehicles. Tony also sells 100% pure biodiesel to customers. He sources this from a company called Wasteless Energy in Bishop's Castle, Shropshire. Tony has been selling this for two months but has had to be very strict about who he allows to buy it.He explains: "When the fuel contains more than 5% biofuel, retailers have to put this information on the pump. And retailers need to get the customer to sign a disclaimer form which states that the customer has researched the subject and therefore the garage is not liable."This is vital and protects the business. It depends on the car - some might be fine with the 100% vegetable oil, but some might not be. But we don't switch on the pump for anyone who hasn't signed the form."So far 20 customers have signed Tony's disclaimer and use 100% vegetable oil at his forecourt. Tony did his research on selling the alternative fuels on the internet and drew up his own forms."My advice to anyone wanting to do this is to research the subject very thoroughly," he says. "Look at what you're going to do and how you're going to do it and talk to other people who have done it. After all, a little bit of knowledge can be a dangerous thing!" According to Tony, the margins are slightly higher on the biofuels than on the traditional fuels. And although the price per litre can be slightly higher for his customers, most tell him they get more miles to the gallon from the B5, plus more power and a quieter ride.And he says that even with the 100% vegetable oil, there isn't the nasty 'chip shop' smell often associated with alternative fuels.For more information on biofuel, log onto [http://www.rixbiodiesel.co.uk] or [http://www.wasteless.co.uk].



  • Weekly
    Retail
  • Weekly
    wholesale
  • Daily
    Average
Weekly retail fuel prices: 12 November 2018
RegionDieselLPGSuper ULUL
East137.08139.69129.73
East Midlands136.60139.38129.02
London137.0265.40139.68129.22
North East136.4569.90142.07128.06
North West136.60138.23128.71
Northern Ireland135.0969.90137.92128.64
Scotland137.07136.04128.45
South East137.4666.90139.94129.99
South West136.7567.90139.46129.38
Wales136.47135.40128.21
West Midlands136.02140.93128.76
Yorkshire & Humber135.86140.71128.57

Most read

As Jet buys sites for the first time since selling its company owned network off in 2001, will this be part of a significant, growing trend for oil companies?

Calendar

See all events