Consumer Needs
Petroleum has a great role in the proper functioning of the economy. The oil sector in the UK comprises more than two hundred companies which are engaged in the course of production, refining, distribution and promoting of the petroleum products. The oil companies, supermarket chains, and the retail stores are covered under the petroleum market aspect. The oil sector has been divided into the two parts in the UK market such as commercial and retail. The retail market comprises the fuels which are sold directly from the petroleum filling stations (pfs). The commercial market includes the independent fuel generators, government agencies, transport, public services and more. The filling station has been reduced from 18000 to 8591 in the last 25 years. The UK petroleum industry has malformed into low margins which become subject of increased competition due to the entry of supermarkets. This paper discusses the various factors which drive the petroleum retail market in the UK.
The oil and gas retail sector of UK is influenced by the increased competition caused by the entry of hypermarkets. There are several factors which affect the UK petroleum retail market. These factors are critically analyzed below:
Consumer needs: There are two factors which influence the petrol filling stations according to the behavior of consumers such as convenience and price. Convenience denotes the nearby place to the consumers. It has been noticed that a few consumers like to travel to get fuel at cheap prices. The focus of the consumers has shifted towards prices with the availability of more petrol filling stations. A location becomes crucial when there is less number of petrol filling stations at the time of driving. According to a survey conducted in the UK, consumers have more emphasis on the price than the previous years (Broadstock & Filis, 2014). The above statements show that consumers mainly consider the price of fuel than the convenience. They can take a step for the cheaper oils in the adjacent locations. The consumers also change their behavior due to the increase in fuel prices. They also give preference to the convenience provided by the petrol filling stations such as loyalty card and car wash facility.
Fuel suppliers: It is significant for the petrol filling stations to maintain a good relationship with the fuel suppliers. The retailers of petrol filling stations purchase petrol and diesel directly and indirectly from oil companies supply division. It is a price based agreement between both parties and signs contract to pay the bargained price (Gupta, 2016). This price is paid in the terms of Platts plus which earns yardstick of prices circulated daily for the petroleum products. This price comprises the storage and distribution cost of suppliers. The distribution costs vary on the distance of the petrol filling stations from the location of suppliers. There are various factors which are helpful in selecting an appropriate fuel supplier like wholesale price of fuel, payment terms, logistics and more (Tan, Ortiz-Gallardo & Perrons, 2016).
Fuel Suppliers
Competition level: The consumers are becoming more sensitive for the prices however the brand loyalty is an important part of the UK petroleum retail market. The hypermarkets have increased the competition which has reduced gross margins (Hannevik, et. al. 2014). The price rivalry is usually influenced by the aspects given below:
- The time and distance which is required to reach another petrol filling stations?
- The size and number of the petrol and filling stations in a precise geographical area.
- The numerous companies which operate the petrol filling stations in a precise geographical area (Jacobson, et. al. 2017).
Government policies: The government policies also affect the business of petrol filling stations. It is helpful in the investment and the behavioral needs. The government policies can be divided into the fiscal, safety standards, regulations, and the environmental policies. The fiscal drivers comprise the taxes like fuel duty and the corporation taxes which impacts the trade of petrol fillings stations. The business policies are evaluated on 5-year base by the valuation office agency. The evaluation is based on the performance of petrol filling stations (Jones, Hillier & Comfort, 2015). The prices of the retail petrol filling stations account for 60% of VAT and fuel duty. The further policies are also significant which affects the petroleum sector. It affects the status of petrol filling stations directly. The government also considers the cost of storing and refining the fuel which should not be very high thus regulated by the government (Radnejad & Vredenburg, 2015).
Consequences: The price of the oil is a significant driver of the market and for which the customers are extremely apprehensive. The customers are only marginally stressed over the convenience factor. The association with the dealers should be maintained to identify various types of relationship between the petrol filling stations and the dealers. If something is critical for the petroleum sector than it is competition. The opposition has been mounted due to the supermarkets which offer non-fuel services. The different types of government regulations affect or benefit the petrol filling station business. The negative impact of the government regulations comprises the VAT, fuel duty, safety standards and the environmental regulations (Griffin, Hammond & Norman, 2016). The decrease in the corporation tax has benefited the petrol filling stations.
The global economic performance considerably depends on the fuel prices. There is a change in the economy in terms of trade and transfer of revenue from the oil importing country to the exporting country. The increase in the oil prices is also caused by the increase in the prices of oil. The macroeconomic influence is affected by the increase in the prices of oil. The exporting countries are facing an increase in real income due to the higher remunerations from the exports. The importing countries are fronting negative impact due to increase in oil prices. These countries are required more energy supplies to keep the local economy running. The increase in the oil prices has caused to increase in the production. It has also increased the production prices. The inflation has made the life of consumers complicated around the world (Dewenter, Heimeshoff & Lüth, 2017). The developing economies are exaggerated due to flat wages and the enhanced rate of spending. The factory gate prices of UK have increased to the highest level due to the highest level in 2009 due to the high oil prices. The inflation rose in 2010 from 2009 and value-added tax was 17.5%. The Bank of England anticipated that the pressures of the inflation would arise more quickly. The government reduced the VAT by 15 % in order to encourage the growth of the economy. The increase in the prices of oil caused a decrease in the oil exports by the UK petroleum sector. The major recession was faced by the countries like UK, US, and Europe due to the rise in the crude oil prices (Perrons & Jensen, 2015).
Competition Level
The technological change is focused to the production of energy which is in the system of gases than the solid fuels. The new technology supports the petrol filling stations and the oil sector and increases the supply within the sector. The production in the oil and gas industry has changed significantly towards technological change (Kihm, Ritter & Vance, 2016). The technological change has increased the profitability along with the sustainability in the petroleum sector. The future of oil industry depends on the continuous technological enhancement. The global oil industries are not in a situation to admit the new technology. The Exxon company used 3D seismic mapping for the exploration process in 1967. It depends on the computing power and cost drop outside the industry. The seismic survey is a common practice in U.S and Mexico Gulf. It caused a dramatic improvement in the productivity due to the horizontal drilling. This technology is useful for increasing production of petroleum fuel (Clancy, Worrall, Davies & Gluyas, 2018).
The fracturing technology has also played a noteworthy effect. It can be prospective technology in the future. The fracturing technology has a vast history. It was initially practiced by Amoco on reservoir basis. The Barnett shale initiated the fracturing with the help of government. The gentle implementation of technology may also outcome low due to the risk of abhorrence on relating to the larger products. The remaining factors which lead to the lessening of fields, economics and the management practices of tanks (Bridge & Bradshaw, 2017). A proper research and development are required to be conducted before the implementation of any technology. The small companies deemed to have a more aggressive approach. The government of UK should support research and development on the investigation of oil and gas.
As the new investigation remains ineffective with the transmission of new technology the budget for research has also reduced. The immediate effect of the technology resulted in the increase in oil prices. The prominent oil companies set up their centers of research and development related to the core business with all the technical specialties (Berkowitz, Bucheli & Dumez, 2017). A fraction is dedicated to the energy technology in the case of venture investment. Some amount is also spent on the mining industry for supporting it.
The petroleum retailers can possibly install the smart Pos system which is developed by the petrol soft to ease transactions and make it more efficient. It comprises features such as an electronic journal, drawers of cash with withdrawal, accessibility of data and online processing system. The demo is also provided for the first time users of Pos system (Raut, Narkhede & Gardas, 2017).
Government Policies
The quick-serve software is also an innovative hardware technology which is used in the foodservice industry. It is developed by the Petro soft. It is also utilized in the petroleum industry division of food in the UK. It is supportive in the accurate and worthwhile experience for both retailers and the customers. The software includes the features such as self-service ordering, customization, and management of menu, reporting and more. The retailer can attain benefit after the installation that is customer empowerment can be increased. It can be made possible by increasing selling opportunities, mounting promotional opportunities, reducing errors in the data entry, reducing data entry time and improving menu pricing accuracy (Chen, Hammond & Norman, 2016).
Conclusion
The oil retail industry of UK is seen growing in the recent years. The uncertainty in the prices of oil causes some effect. The aspects influencing the current size and the arrangement of the oil and gas retail sector have been discussed. These factors have been divided into the four groups such as consumers, suppliers, competition and the government policies. These factors affect the retail sector inversely. From the above paper, it can be determined that the hypermarkets influence the market badly so the petrol filling stations should frame strategies to overcome competition. It can be made possible by offering nonfuel sales at petrol filling stations and other benefits which helps in attracting customers and increases sales of units. The government also plays a significant role in benefitting petrol filling stations and the environment. The environmental standards and policies enhance the environment. The government should make efforts to reduce air pollution at the petrol fillings station sites. The decreasing size of petrol filling stations should be fostered by the government and the competition should be reduced by the hypermarkets by making use of different strategies. The reduced competition can only help stations to attract customers and increase sales. It can help to increase the availability of full service in the UK market.
References
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