Supply Chain Of UK Petroleum Retail Market Program - Myassignmenthelp.

Question: Discuss about the Implications of recent trends and changes within the supply chain of UK petroleum retail market Program of study? Answer: Introduction The various key policies include- using enhanced recovery from current and maturing oil and natural gas fields, promoting energy efficiency, decreasing the use of fossil fuels and thus reliance on imports, promoting energy trade cooperation withNorway, and decarbonizing the UK economy by investing heavily in renewable energy (Study of the UK petroleum retail market, 2012).In 2014, UK petroleum consumption accounted for almost 36%. UKs total petroleum production remained flat between 2013 and 2014, with a slight increase in production in the year 2015(Study of the UK petroleum retail market, 2012). The UK petroleum retail market has undergone a number of significant changes in the past few decades (CHORLEY, 2013). These changes include- the Petrol Filing Stations (PFS) have reduced by 75%, secondly hypermarket owned PFSs have shown growth much more than independent PFSs and company-owned PFSs, thirdly independent petroleum dealers are facing problems and pressures with their business models and this majorly due to the extensive competition from the hypermarkets, fourthly non-fuel sales are becoming increasingly important and high in demand, since it gives the big players and leaders a great market opportunity(CHORLEY, 2013). Also on the supply chain side, there have been certain changes and rationalization of distribution channels. The major oil companies in UK are resorting to outsourcing their road distribution operations (CHORLEY, 2013). The Department of Energy and Climate Change is responsible for UKs energy supplies and their reliability. The PFSs have played a significant role in understanding the overall security of supply of petroleum and other fuels in the country. There have been a number of developments in the UK petrol market since the 1970s, which include a decline in the number of PFSs, increase in the volume of road fuel, change in the mix of fuel consumed between petrol and diesel, and change in the ownership profile of PFSs. A recent survey and analysis of the UK petroleum market, 2015, shows us that the sell-off forecourts by the oil companies is changing the market scenario. Factors affecting the present size and structure of the current oil and gas retail sectors and the impact of the rising price of oil Recent trends have shown that the number of automobiles and vehicles on the road have increased, retail fuel volumes have also increased. But also there has been a change in the petrol vs. diesel volumes, where there is an increase in the diesel volumes. Also one of the major trends in the UK petrol market is the growth of technology, which also presents a great opportunity for UK petroleum retailers to connect better with the customers. The most important fuel brands in the UK petroleum retail market are- BP, Shell, Esso, Texaco, Esso- Nisa, Jet, Gulf, Morrisons, Sainsbury, and Harvest Energy. In 2012, companies like BP, Shell and Esso have faced a serious decline in the fuel outlets, and with fuel and petrol prices rising, the supermarket promotions are attracting more bikers to Tesco, Sainsbury, Asda and Morrison forecourts. Another recent trend in the UK petrol retail market is the growth of supermarkets which are accounting for a huge amount of sales. This has become a serious concern for independent retailers, who have reasons to worry seeing the current market trends, where the fuel duties re also increasing, which shall lead to a loss of re-fuelling facilities, which shall have a negative impact on the rural areas (Gribben, 2012) The fuel committees and organizations like RMI Petrol, are against the supermarkets selling petrol since it is having a negative impact on the petrol industry and market. Also the profit margins of the independent retailers has come down to 4p per litre, thus it is forcing them to keep a tight control of their stocks (Gribben, 2012). Thus falling profit margins and increase in fuel duties have increased the worries of the retailers. Oil companies are losing out on significant market share because of this major issue. Supply chain management The supply chain management of the UK capital intensive oil and gas industry requires careful considerations of trade-offs and risks. With the increase in fuel prices, it is having a direct impact on the supply chain management and logistics of the industry (PwC, n.d.). The UK logistics and supply chain management comprises of 5% of the countrys GDP (PwC, n.d.). There has been a considerable fragmentation in the fuel supply chain over the past few decades. There has been rationalization of storage terminals, outsourcing in the fuel distribution networks and some oil majors have stopped and exited from refining (PwC, n.d.). All this have had an impact on the supply chain management which is positive, but on the contrary it has reduced the spare capacity of the systems (PwC, n.d.). Key business drivers of the UK petroleum market The key business drivers of the UK petroleum market are divided into four major sections- consumer needs as a key business driver, relationship with suppliers, level of competition and environmental policies. The consumers are driven by two main factors here- convenience and price. They want to purchase fuels that are cheaper and also location wise if the PFSs are convenient they prefer that. Secondly the PFS supplies petrol and diesel from oil companies and independent suppliers(PwC, n.d.). There are various agreements which are made between the wholesalers and retailers, this contractual relationship points out the various points and rules which have to be adhered to. Some of these terms and agreements include- availability of suppliers, type of contract between the fuel owner and PFS owner, the logistics arrangement, payment terms and more. Thirdly the level of competition also plays an important part in the UK petroleum retail structure, the worth of hypermarkets have also led to serious competition. This has resulted in pressures on the various types of PFS owners. Also the hypermarkets are providing and using special marketing techniques by giving discounts to customers, special offers which the normal PFSs cannot provide. A high growth rate of the non-fuel sales is also one important business driver in the PFS market. Government policies and regulations have a major role to play here and they can be divided into- fiscal drivers environmental and safety regulations(Renshaw, 2015). The fiscal divers include the VAT rates, tax rates, duties, business rates and corporation taxes. Lastly the environmental factors are also very crucial to the growt h and development of the petroleum industry. Knowing the characteristics of petroleum, there are various environmental policies which have to be understood, especially in terms of biofuels and vapour recovery(Renshaw, 2015). The PFSs across UK are different in terms of various attributes like- size, fuel volumes, locations, access and extra services. The major business models of the UK fuel market include- hypermarket, company owned, independent retailers, high shop turnover business model, and low shop business turnover model. Conclusion Future of UK petroleum retail market The UK petroleum market has changed over the last few decades, the maximum rate of petroleum extraction has been achieved. It is being forecasted that the rate at which petroleum is being extracted can deplete the total rate of petroleum output. The UK petroleum refineries market is not in a good shape and the last five years have proved to be very detrimental for the industry as a whole. This is because of two important reasons- refining crude oil in the European region is a high-risk and low-reward business(Processengineering.co.uk, 2015). Thus it is not receiving ample investment opportunities for this industry. Also an important trend in UK, is a radical shift from petrol usage to diesel usage, and demand in Europe has fallen since 2008, and there has been a shift to cheaper crude, and lower energy costs. This has led to Europe being not very competitive globally in terms of petroleum export and import(Processengineering.co.uk, 2015). Another aspect of this problem is the environmental burden which the UK government has imposed on the businesses. Now the point here is that no businesses would want to incur operational costs in maintaining the business according to the regulations, but not incur any profits(Processengineering.co.uk, 2015). There has to be some return on investments so that businesses can think of running. Now if this scenario continues to persist then the country and industry will be highly dependent on other refineries and oil industries for the petroleum and other fuels, this shall increase the import burden of the nation(Processengineering.co.uk, 2015). It is important that the country is self-reliant on manufacturing and selling the fuels. Now it is in the hands of the governments and policy makers to ensure that when an industry is facing competition globally, it needs to exempt some of its rules and regulations. Now we know that the petroleum and fuels industry play a very important role in the growth and development of a nation, thus from a strategic point of view restoring the industry is important. The future of the UK petroleum market has to face a number of challenges as well and seeing the global climatic conditions, it can be said that the industries cannot formulate policies independently, they have to consider the governmental policies and global rules which apply to the fuels industry and petroleum market. The UK petroleum market is a dynamic one and the oil market has faced various changes since the 1990s (Greenman Fryer 1990, p. 316). There exists, within the petrol market, not just the oil companies but the hypermarket retailers who are overtaking the market. The future vision of the UK petroleum market can improve with the right intervention and strong governmental policies which will give the independent retailers and PFSs their due competitive profit margins. The UK downstream oil sector consists of almost 200 companies who are engaged in the refining, supply chain, distribution and marketing of petroleum products across the country. They are members of the UKPIA (United Kingdom Petroleum Industry Association), along with important hyper and super market retailers, independent retailers and commercial sites. In 2015, the consumption and demand levels of petroleum have been on an increase, and there were two important drivers which accelerated this- great economic growth and reduced oil prices(Kemp, 2015). In the first half of 2015, the consumption of petroleum products rose by 1.6%, according to the reports of the UK Department of Energy and Climate Change(Kemp, 2015). A positive change in the UK petroleum industry is that since the third quarter of 2014, the consumption levels have grown(Kemp, 2015). There was a time in 2005, when the petrol consumption levels in Britain reached its peak, and then with the great recession of 2008, it sharply fell down, leading to a sharp increase in the oil prices(Kemp, 2015). The years between 2010 and 2014 were the recovery years, and the retail petroleum market tried to recover, but saw a series of failures with petrol pumps closing down and demand going down due to the rise in oil prices. Also it is imperative to mention here that there has been a major shift in consumption from petrol and gasoline to diesel fuels (Kemp, 2015). But even though there has been an increase in the petroleum consumption levels, but it is just the beginning, since for the prior nine years the UK petroleum retail market has seen a decline in the consumption levels. Thus it is important that the governments and policy makers analyse the present scenario, competition, laws related to the petroleum market, the need for a revised fuel policy and deep understanding of the global economic fuel demands. References CHORLEY, M. (2013).How 75% of petrol stations have closed in 40 years forcing drivers to travel further and pay more to fill up tanks. [online] Mail Online. Available at: https://www.dailymail.co.uk/news/article-2264588/75-petrol-stations-40-years-forcing-drivers-travel-pay-tanks.html [Accessed 21 Mar. 2016]. Gribben, R. (2012).Supermarkets now sell almost half of all petrol sold in UK. [online] Telegraph.co.uk. Available at: https://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9207714/Supermarkets-now-sell-almost-half-of-all-petrol-sold-in-UK.html [Accessed 21 Mar. 2016]. Petroleum.co.uk. (n.d.).Petroleum - The Future of Petroleum. [online] Available at: https://www.petroleum.co.uk/the-future-of-petroleum [Accessed 21 Mar. 2016]. Processengineering.co.uk. (2015).Refined Capacity: the future of UK refineries | Process Engineering. [online] Available at: https://processengineering.co.uk/article/2019675/refined-capacity [Accessed 21 Mar. 2016]. PwC. (n.d.).Logistics Posts. [online] Available at: https://www.pwc.co.uk/industries/transport-logistics/transport-and-logistics-logistics-posts.html [Accessed 21 Mar. 2016]. Renshaw, A. (2015).Dealers taking over. 1st ed. [ebook] UK: Fuel market review, p.11. Available at: https://forecourttrader.co.uk/files/Fuel_Market_Review/Fuel_Market_Review_2015.pdf [Accessed 21 Mar. 2016]. Study of the UK petroleum retail market. (2012). 1st ed. [ebook] UK: Deloitte, p.93. Available at: https://www.ukpia.com/docs/default-source/download/UK_Petroleum_Retail_Market_Study_Final_Report_v3_STC.pdf?sfvrsn=0 [Accessed 21 Mar. 2016]. Greenman, J Fryer, M 1990,' Estimating the Oil Reserve Base in the UK Continental Shelf', The Journal of the Operational Research Society, vol. 41, no. 8, pp. 725-733. Retrieved on March 21st 2016 from: https://www.jstor.org/stable/pdfplus/2583477.pdf