If the most important factor affecting the forecourt sector is fuel sales, then the 2016 Statistical Report from UKPIA (UK Petroleum Industry Association) contains a heartening message. Total road fuel sales looked to be in a permanent decline after year-on-year falls from their peak in 2007 to 2013, but the trend is now positive again after the figure increased slightly for the second consecutive year in 2015. Nevertheless total road fuel sales are 9% lower than they were in 2007.
Projections of demand for road travel are also positive with forecasts that growth will continue the upward trend of the past few decades and increase by nearly 50% over the next 20 years. However, UKPIA notes "due to advances in engine efficiency, this trend is not reflected in product demand".
Drilling down into the sales figures, there is contrast between the fortunes of petrol and diesel. Annual sales of petrol have been falling since reaching a peak of 33bn litres in 1990 when it had a 73% share of the market, and by 2015 had halved to 16.5bn litres. Meanwhile diesel has shown an annual growth rate of 3% over the past 20 years and overtook petrol as the biggest seller in 2007.
The report notes: "As a result of the marked rise in the popularity of diesel vehicles and increased growth in freight transport, diesel sales in the UK exceeded 28bn litres in 2015."
However, diesel may be close to its peak according to the report. It says: "As petrol engine efficiency improvements continue to catch up with that of diesel, forecasting the current dieselisation trend long term is difficult, particularly as the growing drive for a reduction in carbon emissions from transport will increasingly result in tax levels becoming more aligned with vehicle carbon emission levels, and most likely lead to a marginal increase in the attraction of smaller capacity gasoline fuelled vehicles.
For these reasons, along with emerging air quality arguments, analysts contend that the growth in diesel’s market share will slowly cease and reach a peak in 2017, followed by a gradual decline."
The changing balance between demand for diesel and petrol has been difficult for the oil refining sector to cope with as the UK was historically geared up to satisfy greater demand for petrol, and as the number of refineries in the UK has fallen from a high of 19 in 1975 to six currently in operation. The most recent closures were the Petroplus Coryton Refinery, which ceased operation June 2012, and the Murco Milford Haven refinery which closed in December 2014. The refiners say they have been reluctant to invest in facilities to produce extra diesel because of the prohibitive cost, and so the UK has become an importer of diesel and aviation fuel while excess petrol and fuel oil has been exported. With imports increasing, the UK became a net importer of petroleum products in 2013, and the gap has been increasing ever since.
UKPIA’s report also analyses the way pump prices have changed over time. Petrol and diesel climbed steadily, with occasional spikes, from 1995 until mid-2014. However, with crude oil prices falling by more than 70% between mid-2014 and the end of 2015 there was an exceptional fall in prices at the pumps, with petrol down 12.5% during 2015 and diesel prices falling by 14% over the same period.
The report also emphasises that two thirds of the pump price of petrol and diesel is made up by duty and VAT. Duty is charged at 57.95ppl and VAT is 20%, and together they make up 67% of the overall pump price. With the cost of the product accounting for 25% of the pump price of petrol, and 26% of diesel’s pump price, this leaves just 6% of the pump price of petrol and 7% of the pump price of diesel to cover oil company and retailers’ site, distribution and storage expenses.
Filling station statistics are also included in UKPIA’s report and it contrasts the steady decline of overall sites, with an average of 170 closing every year in the past decade, with the number of supermarket sites, which has been increasing by 3% each year. In 2014 the proportion of road fuels sold by supermarkets fell for the first time since 1999, but their share went up slightly in 2015 with them accounting for 44% of the market share with just 16% of the filling stations. Supermarkets now account for 46% of all petrol sold and 42% of diesel.
Oil companies had a market share of about 17% with 14% of the filling stations. Independent sites account for 69% of the sites but just over 38% of sales volume. The disparity between supermarkets and independents was illustrated most starkly in figures for throughput per site. The average for all filling stations was about 6.5mlpa, but the average supermarket site’s throughput is about 11mlpa while independent sites average just over 2.3mlpa.
The Statistical Review 2016 report can be downloaded at the UKPIA website: www.ukpia.com.
UK market review
Greenergy, in its recently published Annual Report 2015, gave more analysis of the growth of diesel in its review of the UK market.
It said: "UK road fuel sales grew this year for only the second year since 2008, boosted by economic growth and falling oil prices. Diesel consumption grew by 3% compared with 2014 while petrol consumption fell by 2.5%, affected by ongoing improvements in vehicle fuel efficiency.
"This dieselisation of UK demand means that UK refineries are still producing too much petrol and not enough diesel to meet current market requirements. In this financial year the UK consumed 62% of its road fuel as diesel and just 38% as petrol a big change from seven years ago when the market comprised 52% diesel and 48% petrol. Before its closure, the Milford Haven refinery, by contrast, produced equal amounts of diesel and petrol.
"In the past, UK refineries were easily able to export petrol that was no longer required in their home market. Increasingly, however, those export markets are closing as refining expands in the US, Middle East and Asia. As petrol and diesel are inter-dependent in the refining process, this closure of petrol markets abroad as well as at home constrained overall UK refinery production this year.
"UK refinery output fell 9% in the 2014 calendar year and net imports of petroleum products were the highest in 30 years. Our infrastructure means we have the capacity to make up any shortfall in refinery production through imports."
It added: "Greenergy estimates that domestic petrol demand could be met by just three typical UK refineries, but as many as 14 would be required to produce all of the UK’s diesel, gasoil and jet fuel demand."