The petroleum marketing industry (wholesale and retail) employs more than 56,000 people and contributed nearly $75B to the Australian economy during 2014/15. A quick glance of the statistics relating to this important Australian industry points to a reasonably positive outlook in the near term, largely as a result of total fuel sales stabilising after annual falls in recent years.

Steadying annual sales of motor spirits, increased volumes of diesel and a relatively stable workforce auger well for the near term outlook of the Petroleum Wholesale and Retail sectors in Australia.

These two sectors employed a total of 56,854 Australians during 2014/2015 and contributed $74.9 Billion to the national economy.

Retail

Following several years of contracting sales, total motor spirits sold in Australia during 2014/2015 increased by 0.3% over the prior year. This result represents a stabilisation in annual sales and compares favourably with the net decline of 2.95% recorded in 2013/2014.

Statistics provided by the Australian Department of Industry (Australian Petroleum Statistics) shows there has been a sustained shift in motor spirit purchases, with an increasing number of consumers purchasing higher octane fuels (i.e. Premium Unleaded Petrol) and moving away from the cheaper, lower octane fuels (i.e. regular unleaded [RULP] & E10).

Nationally, the market share of premium fuels increased by 2% in 2014/15, with a large portion of this increase centred on NSW as consumers continued to purchase premium fuels over ethanol blended alternatives.

The past 5 years has also seen a remarkable increase in the number of diesel powered light duty vehicles (including cars, utilities, vans and 4WD’s) with a commensurate increase in sales of diesel within these segments of the national vehicle fleet.

The Australian Bureau of Statistics reports that sales of diesel powered passenger cars grew by 96.4% between 2010 and 2015 while sales of diesel powered light commercial vehicles on the road increased by 62.9% over the same period.

This increase in the number of diesel powered vehicles on the road has seen an associated increase in the sales of retail diesel, with a 43% increase between 2009/2010 and 2014/2015.

ACAPMA CEO Mark McKenzie said ‘With recent model vehicles having greater fuel efficiencies we have seen a steady contraction in the volume of motor spirits sold in Australia, especially in regards to RULP, despite an increase the size of the Australian fleet”.

‘Australian retail fuel consumers appear to be making a conscious decision to purchase vehicles which can utilise the product better, be it diesel or unleaded, and are reaping the benefits’, Mark said.

On the down side, margins for retail fuel businesses are under pressure. Data provided in the ACCC Monitoring of the Australian Petroleum Industry report (Dec 2014) suggests that average profit on each litre of fuel was just 1.63cpl in 2013/2014.

“For an average fill of 37 litres, this means that fuel retail businesses are earning a gross profit of just 60 cents per customer”, said Mark.

‘Service station businesses must accommodate the high volume low margin characteristics of the retail fuel market in Australia – a challenging proposition for any business owner and one that provides testimony to the business skills of the business owners that comprise our industry’, said Mark.

The number of retail sites in Australia has remained steady over the past few years at a little over 6,400 sites. Each service station employs an average of 6 staff members.

Retail sites operated by the two supermarket chains – Coles and Woolworths – currently account for nearly 25% of all retail sites in Australia. Despite operating only a quarter of all sites, these supermarket chains currently account for almost 50% of the retail fuel sales in Australia.

Of the remaining 75% of retail sites, approximately two-thirds are independently owned/operated, or operate under some form of franchise or branding arrangement.

“The disproportionate share of fuel sales now controlled by the two supermarket majors provides evidence of a concentration in retail market power that has been secured by the grocery majors in the past decade, largely as a result of the shopper docket issue”, said Mark.

Wholesale

The Australian wholesale market is dominated by the four major branded petroleum businesses (BP, Caltex, ExxonMobil, and Viva Energy).

These four businesses directly control 92% of the fuel supplied to the Australian market – either via refining or importation of finished products.

The remaining 8% of wholesale volume is shared between 6 fuel import businesses.

Despite the concentration of market power amongst the four oil majors, there has been a significant increase in the volume of fuel imported into the country by independent wholesalers over the past 5 years.

Again referring to the ACCC’s December 2014 Industry report, the volume of fuel imported by the 6 independent wholesale businesses has increased by 25% over the last 5 years.

Beyond wholesale importers there are a number of smaller independent wholesale distributor businesses that purchase fuel to service their own networks or fuel retailers in their region and the surrounding region.

Typically referred to as “fuel resellers”, these businesses accounted for 44% of all wholesale fuel revenue and supplied around 50% of the fuel sold by fuel retailers.

“Compared with the prior year, total revenue earned by fuel wholesalers fell by 22% in 2014/15, largely as a result of declining demand from the resources sector and lower overall fuel wholesale and retail prices stemming from the international market”, said Mark.

Further information about the nature of petroleum marketing in Australia can be obtained by contacting the ACAPMA Secretariat on 1300 160 270, or email assist@acapma.com.au.

Data Sources

ACCC Monitoring of the Australian Petroleum Industry, Dec 2014
Department of Industry, Australian Petroleum Statistics
IbisWorld, Fuel Retailing in Australia, August 2015
IbisWorld, Petroleum Product Wholesaling in Australia, July 2015

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