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

Fuelling change

Fuel retailers have experienced unsettling times recently. For years there has been steady growth of diesel vehicles versus petrol, but this has suddenly gone into reverse. Then there were lurid headlines claiming the end was nigh for the industry when the government announced plans to deal with air pollution, and mentioned not for the first time that it aimed to end the sale of new petrol and diesel cars and vans by 2040.

And while retailers assess the long-term future for the industry, another major upheaval could be announced any day. Over a decade ago the government committed to introducing E10 petrol with 10% bio fuel by 2020. But since then there has been significant opposition to the plan, and the government has kept putting off announcing how and when it would be done, or possibly that it would be shelved altogether. With time running out, the government ran a consultation on the Road Transport Fuel Obligation, and its response was imminent as this article went to press.

Ramsay MacDonald, retail director of Certas Energy, is a staunch opponent of the introduction of E10. He says: "If you are a dealer and your fuel supplier is supporting its introduction ask them why? It is certainly not for your benefit. Certas Energy has been strongly against the introduction of E10 since the start and continues to stand side by side with the PRA on behalf of the UK's dealers in opposing its introduction.

"With the momentum switching dramatically towards electric in recent months, the idea of introducing E10 now to improve air quality by de-carbonising transport is folly and has the potential to further reduce consumer confidence in our industry. It is out of sync with current momentum. There is evidence that it will have no significant impact on air quality, and a potential major impact on petrol retailers and the general public. First confusion reigns; second it could mean increased costs for some dealers to upgrade pumps, pipes and even tanks; and third, potential higher prices at a time when motorists are already juggling their monthly expenditure as inflation outstrips wages."

He adds: "The potential negatives don't stop there. It can exacerbate corrosion and destroy rubber and plastic and there is evidence that E10 fuel reduces fuel efficiency in some cars by up to 4%. Latest estimates suggest 8% of the cars on UK roads cannot take it as well as many motorbikes and there is no clear evidence to suggest it reduces emissions."

In the opposite camp is Andy Eastlake, managing director of Low Carbon Vehicle Partnership (LowCVP), which would manage the communications strategy if E10 gets the go ahead. With petrol set to remain a mainstream fuel for at least two decades, and maybe more, he says it is crucial to de-carbonise road fuels, and the quickest way to do this is to introduce E10. "If we could bring E10 into the petrol fleet it's the equivalent of introducing half a million electric cars. It's a significant impact to our lower- carbon transport."

Eastlake also believes the potential problems for drivers have been overstated: "The vast majority 95% of cars on the road are fully warranted and compatible with E10. The certification process for new petrol vehicles for emissions and fuel economy uses E10 as the reference fuel, so new petrol vehicles are optimised and certified to run on E10."

He says he understands the fears of dealers, but the best thing for them would be a rapid transition to E10 with strong support from all parties. "One of the risks to the PRA is that a lot of its members can't stock two grades of fuel, so that's where they are exposed to a poor transition where they are left not knowing which fuel to stock, because they don't know which one the consumers are going to be wanting. The key thing is to make a significant transition to E10, so E10 becomes the mainstream fuel and the legacy grade is effectively the 98 RON. What we need is for consumers to be demanding the lower-carbon version, and one of the ways to do that is to give it preferential treatment in terms of pricing, be that through fuel duty or some sort of support at the pump to make it attractive to consumers."

Diesel growth

While considerations of which type of petrol may be to come, many dealers have increased their provision of diesel over the years as diesel sales and the number of diesel cars on the roads have steadily grown. Barring a short decline in 2008 and 2009, diesel has seen an average annual growth rate of 4% in the last three decades, while sales of petrol have been falling since reaching a peak of 33 billion litres equivalent to a 73% market share in 1990. Today, sales of petrol have fallen to 16.4 billion litres. But the increase in diesel car numbers was driven by a favourable tax regime, and as concern about air pollution from diesel engines have surfaced, the roles have been reversed, with diesel drivers being penalised, and so sales of new diesel cars have begun to fall.

Andrew Owens, chief executive at Greenergy, the UK's largest supplier of road fuel, comments: "We expect consumers to start moving away from diesel to petrol light-powered vehicles over the next few years in response to air quality concerns. There were some early signs of this happening in the first six months of this year although with cars on UK roads averaging 7.8 years, any change in vehicle preferences is going to take time to filter though to fuel demand. In our view, the rate of change is likely to be greater from the mid-2020s, as a result of a number of changes in technology and vehicle purchasing preferences, such as:

enhanced use of petrol hybrids, partially mitigating petrol demand growth resulting from a move away from diesel engines;

increased home-charging of hybrid vehicles if their 'electric only' range can be increased;

increased use of electric vehicles in urban fleets influenced by public policy.

"Taking all these trends together, the diesel growth of the past 20 years could be reversed at national level from the mid 2020s, without offsetting growth in petrol demand. However, this reversal could be mitigated by population growth in some regions, such as the South East of England. Of course, it remains to be seen whether the government's position for 2040 actually materialises. There are at least four General Elections between now and then. If it does, then clearly the trends mentioned above will be accelerated." He also highlights the impact car makers can have on demand, adding: "We consider initiatives such as motor manufacturer scrappage schemes to be as significant in terms of fuel demand as government policy."


Government wants zero emissions by 2050

The government has stated that it is aiming for all cars and vans on UK roads to be zero emission by 2050, which means a replacement for traditional combustion engines will need to be in place by then. The problem, however, is that it is a chicken and egg situation. Potential suppliers of electric charging points and hydrogen refuelling are reluctant to invest in them while there is so little demand, and consumers are reluctant to buy the vehicles while there is so little provision for them.
At present the industry is waiting for the Automated & Electric Vehicles Bill to be published, as this is expected to contain requirements on "larger" filling stations and motorway service areas to provide electric charging points and hydrogen refuelling facilities. Meanwhile Shell has taken the lead among fuel suppliers. Its downstream director, John Abbott, said it needed to understand the new energy landscape, which is why it is part of the H2 Mobility joint venture in Germany, which is dedicated to establishing a nationwide network of hydrogen filling stations.

Want more stories like this in your inbox?

Sign up for our FREE email newsletter

  • Weekly
    Retail
  • Weekly
    wholesale
  • Daily
    Average
Weekly retail fuel prices: 15 July 2019
RegionDieselLPGSuper ULUL
East
East Midlands
London
North East
North West
Northern Ireland
Scotland
South East
South West
Wales
West Midlands
Yorkshire & Humber

Most read

As ESSO and BP join Shell and Gulf in launching new loyalty programmes this year, are such schemes a key tool for businesses today?