Although the retailing of fuels on the filling station forecourt is a familiar everyday feature, a similar volume of fuel and other products is sold to a wide range of customers from airlines, power generators and industrial users to public sector operators and the military.
The humble filling station has come a long way in a comparatively short period of time. The modern forecourt today with multi-pump dispensers, car wash and convenience food store is a far cry even from the 1950s when a roof canopy over the pumps was considered a convenience rather than a necessity.
A modern high volume throughput filling station selling 5 million litres per year costs about £2 million to build. About 60% of this goes into equipment that is not even seen but which is essential to the safe and more environmentally friendly operation of a modern site.
Underground storage tanks and fuel lines are either made from steel set in concrete or special plastic. Tanks are usually double skinned and both tanks and connecting pipes have detectors which warn of the slightest leak before it becomes a problem.
Storage tanks also have vapour recovery systems which recover vapours emitted from the tank when it is being filled with petrol from a road tanker. Often called "Stage 1" recovery, this system has been extended as "Stage 2" to capturing vapours when a vehicle is filled.
This process makes a significant contribution to cleaner air as petroleum vapours or VOCs contribute to the build up of low level ozone or smog, particularly during hot dry spells.
Also underground out of sight is the drainage interceptor system. This collects water off the forecourt which may contain fuel or oil and stops it getting into surface drains and watercourses.
Forecourt branding, as a part of product differentiation, has played an important part in fuel retailing from the early days of the first roadside filling stations at the start of the last century.
With the expansion of the retail fuels market in the post war period, forecourt promotions became more prevalent. The methods employed included promoting the quality of branded fuel, particularly its octane number, free collection stamps or gifts for each gallon of fuel - an early example of today's more sophisticated loyalty schemes - through to the ubiquitous free glasses.
Petrol retailing is a highly competitive business, a trend that has accelerated during the 1990s to now. With about thirteen significant players in the UK retail fuels market, pump prices in the UK have been consistently amongst the lowest in Europe, excluding duty and VAT which have grown to represent between 65% to 75% of the price at the pump.
These conditions reflect, in part, the growing presence of supermarkets, whose share of the retail fuels market has grown from 11% in 1992 to around 44% in 2016, a period during which the overall market has seen little volume growth. The road fuels’ market has grown slightly in 2016, for the third consecutive year, following an overall decline of 11% between 2007 and 2013.
The supermarkets' growth in market share has coincided with a rapid expansion in their large out-of-town stores, with filling stations able to sell large volumes of fuel, particularly to people doing their weekly shop at the main store.
The overall effect of this has been to force the closure of smaller and less well located filling stations, a trend that has been compounded by the increasing costs of meeting stricter environmental standards. The result is that the number of filling stations in the UK has fallen from about 19,000 in 1990 to 8,476 in 2016.
Increasingly, the slim margin on fuel retailing has prompted the re-development of many sites to boost volume throughput and provide a better standard of service and facilities, with particular emphasis on larger shops or convenience stores which are a vital element in overall site profitability.
In a highly competitive market place with high volumes and low margins, changes in underlying factors, such as cost of refined product and exchange rates, tend to be reflected fairly quickly in pump prices as retailers cannot afford to ignore market fluctuations for any length of time.
In the last 15 or more years, the role of the forecourt "shop" has changed markedly from being a small kiosk which stocked oil and a few commonly used consumables for the motorist and the average car, to today's convenience type store.
This marked change is, in part, a reflection of social and technology factors such as the transition to busier lifestyles more reliant on convenience foods and the development of sophisticated "tinker proof" cars. The main influence, however, has been the erosion of competitive advantage in fuel retailing and increased price competition which has driven companies to develop non-fuel revenues from the forecourt shop.
With overall convenience store spending forecasts set to reach £30 billion pounds, this represents an increasingly important source of revenue in which forecourt operators are well placed to share; and a vital one as profits on fuel are unlikely to recover to the point where fuel retailing on its own, other than at very high volumes, is likely to be viable.
In recognition of this, many fuel retailers have established joint venture operations with supermarket brands for the larger convenience store/fuel outlets.
The UK has now moved to sulphur-free road fuels (sulphur content not exceeding 10 parts per million or 0.001% by weight).
Liquid Petroleum Gas has become more widely available, reflecting its popularity as a cleaner fuel and one attracting considerably less tax, although that is being reduced as its environmental advantage diminishes, and also bio-diesel, a 5% blend with sulphur-free Diesel.
Modern formulations of petrol and diesel contain a number of additives to promote clean running of engines and to compensate for the removal of sulphur.
In addition, in October 2007, Parliament approved the Renewable Transport Fuel Obligation (RTFO), requiring suppliers to incorporate a proportion of biofuel in petrol and diesel. The RTFO was amended in December 2011 to reflect the requirements of the Renewable Energy Directive (RED, 2009/28/EC). The RED came into force and requires that all biofuels crossing the duty point should meet the carbon and sustainability criteria as defined in the Directive.
For further information on biofuels, please refer to the Fuels section of our website.
Non retail markets
In volume terms sales to major commercial customers, government agencies and the military account for about 40% of UK inland fuel demand. This sector of the market tends to be high volume and price sensitive, because in many sectors the fuel cost represents a high proportion of operating costs.
Commercial customers include airlines, power generators, industrial customers, the marine and road transport sectors, large volume independent fuel distributors, government agencies including hospitals, and the military.
Many of these customers will receive deliveries direct from a refinery or terminal either by pipeline, by barge or by road. Some with their own transport will collect directly from a terminal.
In the case of aviation fuel supply to major airlines, the business is very global with contracts for supply often covering a number of UK, European and International airports for each operator.
Smaller commercial customers and the agriculture sector are very often supplied by independent fuel distributors, fuel distributors tied to a particular oil company or an oil company's own distributor.
Petrochemicals, solvents, lubricants and bitumen.