Uk Petroleum Market Essay

1595 words - 7 pages

The UK petroleum industry consists of 3 main retailing ownership models. The 3 models are oil company, independent dealers and supermarkets. The concentration ratio in the petrol retail market has gone through a couple of changes over the past 10 years. Since 2004, the market share of supermarkets has increased by 10%, from 29% to 39%. In the same period, the market shares of oil companies and independent dealers dropped by 8%, from 37% to 29% and 1.6%, from 34% to 32.4% respectively. (UK petrol and diesel sector, 2013: 44-45). Please refer to Appendix A for the graphs. If we look at the market by types of ownership, it seems like oligopoly as 3 types of ownership dominate the industry. However, if we break it down into individual companies, the statistics reflects the opposite. Using the Herfindahl – Hirschman Index where the market share of each firm is squared and added up, we can find the market concentration of the UK petrol retail. (Modern Analyst, 2013)
Please refer to Appendix B for the table and values.
HHI = 16 ² + 15² + 14.1² + 10.4² + 9.7² + 9.4² + 6.1² + 5.4² + 4² + 2.4² + 2.4² + 1.2² + 1.2² + 1.1² + 0.7² + 0.5² + 0.2² + 0.1² + 0.1² + 0.1²
= 1069.21

As the HHI value is between 1000 and 1800. The UK petrol retail market is considered moderately concentrated which indicates that it is more towards monopolistic competition than oligopoly.

Although independent dealers make up 32.4% of the petrol market share, they own 59.9% of the forecourts in the UK. Oil companies and supermarkets own 25.5% and 14.6% of the forecourts in the UK respectively. (UK petrol and diesel sector, 2013: 45). Please refer to Appendix C for the graphs. Even though supermarkets own the least amount of the forecourts, they have the highest market share in terms of petrol sold out of all the retailers. This shows that supermarkets have a larger volume of petrol in their stations and possibly more refuelling pumps in each station. It can be inferred that supermarkets are able to do bulk purchasing due to their spending power. Thus, it proves that there are barriers to entry for the UK petrol retail market in the form of economies of scale. Besides economies of scale, other barriers to entry such as low profit margins have discouraged potential owners. As tax accounts for almost ¾ of petrol prices, newcomers would have difficulty competing with established companies, as they cannot afford to follow the prices set by the large firms (Sully, 2008).

The Office of Fair Trading reported that oil companies are trying to exit the UK retail market. An example would be Total selling its forecourts to Rontec Investments and Murco’s forecourts being put up for sale for over a year (UK petrol and diesel sector, 2013: 46). Looking at the history of the UK petrol market over the last 10 years, we can infer that oil companies will continue reducing their market share while supermarkets will continue the expansion of their forecourts. This will reduce the petrol competition in...

Find Another Essay On UK Petroleum Market

Is the worlds Oil Running Out?

657 words - 3 pages Law presentation – Is the world’s oil running out?The Organisation of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental organisation which was created at the Baghdad Conference in September of 1960 by Iraq, Iran, Kuwait, Venezuela and Saudi Arabia. In the following years these 5 founding nations were joined by Quatar, Indonesia, Libya, United Arab Emirates, Algeria, Nigeria, Ecuador, Gabon and this year by

Untitled Essay

4069 words - 16 pages include the distribution of petroleum and textiles.he United Kingdom is a leading industrial nation. Britain ranks as an important steel producer, exporting nearly half of it?s finished steel. An increasing percentage of Britain?s manufactured goods consist of sophisticated electronic equipment. The chemical industry is also flourishing in the UK and the country is one of the world?s chief centers of printing and publishing. The industrial

United Kingdom: An Economic Overview

3638 words - 15 pages inflation rate (consumer prices) in the United Kingdom is 2.7% (1998), which is noticeably high when compared to Canada's (1998) rate of 0.9%Major Natural Resources: The United Kingdom's major natural resources are coal, petroleum, natural gas, tin, limestone, iron ore, salt, clay, chalk, gypsum, lead, silica, arable land.Major Industries: The major industries that are primarily found in the UK are, machine tools, electric power equipment, automation

To What Extent is the Proposed Scottish Split from British Rule Beneficial for Either Country?

3522 words - 15 pages though an economically strong independent Scotland is nigh unreachable. In business, having a strong economy means that companies have confidence in a capable job market. Such a job market will not be achievable regarding the burden of National Debt and the recent statements by industries currently based in Scotland. Scotland contains the larges reserves of oil in the EU as well as also being it’s main petroleum provider. Oil related industries

The Possibilities of Expanding the Business into New Overseas Markets

3347 words - 13 pages The Possibilities of Expanding the Business into New Overseas Markets As international marketing consultant of Mackie’s of Scotland, the ice cream maker, it is my duty to consider the possibilities of expanding the business into new overseas markets, successfully. The Scottish ice cream market will be researched thoroughly. The UK target market of Mackie’s will be analysed. Finally a suitable country will be chosen to market the product

SWOT Analysis of ConocoPhillips

1792 words - 7 pages threats to Conoco Phillips. The result that the steep competition between the companies will produce not only affect the sales of many companies, but also it will have a significant impact on operation of those companies. As the petroleum products are almost of the same kind produced by several companies, the ConocoPhillips will find it difficult to segment its market in the industry. With very small room for product differentiation, the

Fuck me

1484 words - 6 pages beneficial for businesses• Australia's population of 21 million makes the market really small• International trade allows businesses to reach the world's population and tap into much larger markets • Leads to greater profits and employment in Australia• One in five jobs rely on export industries• 20% of Australia's GDP comes directly from exports• Australia's Place in World Trade International trade involves large sums

HEllo

1484 words - 6 pages beneficial for businesses• Australia's population of 21 million makes the market really small• International trade allows businesses to reach the world's population and tap into much larger markets • Leads to greater profits and employment in Australia• One in five jobs rely on export industries• 20% of Australia's GDP comes directly from exports• Australia's Place in World Trade International trade involves large sums

Impact of Oil Prices and Other Macro Economic Variables on GDP

3979 words - 16 pages from consumers to production . Due to rise in prices of domestic products, these become less competitive in international market and thus, their exports suffer badly. This further worsens their prospects of growth. The world needs to increase the oil production. At present, only 20- 40% of the oil in place is being drilled. It can be enhanced up to 60% through use of advance technology for recovery of oil, extension in drilling techniques and

Collusive Agreements or Cartels in Various Industries

1712 words - 7 pages , then outline a past example and finally explain why this silent or spoken agreement may break down. Collusive agreements or cartels may however be created by governments to protect and positively influence markets, examples of this are the US sugar manufacturing cartel (operating between 1934-74) and OPEC which is still in operation today. Collusive behaviour exists only within an Oligopoly market structure as a result of the extreme mutual

Supermarket retailing---- Tesco Vs Sainsbury's

3852 words - 15 pages , market is dominated by some main supermarkets, such as Tesco, Sainsbury, ASDA and Morrison, resulting in the power of supermarkets suppliers is low in the UK. However, as the development of other store formats, such as convenience store, catalogue shop (Argos), the suppliers' loyalty is less than before, so supermarkets retailers should pay more attention to it and develop their global strategies to get more suppliers.*GovernmentGovernment is

Similar Essays

Woodside Petroleum Ltd Essay

741 words - 3 pages was met with GFC in its market. Despite of making the profits the company sustained the affect of GFC on its business by axing the Employees. While in the crisis and effected by the financial crisis at a stage it cut off the most number services which are not of profitable through which the values can be changed at least with a small difference in the company's share. Woodside petroleum which is like the monopoly based fuel station in the

Country Report Of Uk And Petroleum Industry

6839 words - 27 pages countries capacity.•Retailing and transportation. The UK downstream oil business comprises over 200 companies involved in the refining, distribution and marketing of petroleum products. They range from large multinational oil companies, which are members of UKPIA, supermarket chains, independent retail groups, through to the independent retailer with one site. The market for transport fuels in the UK amounts to about 46 million tones per year and

Impact Of Increasing Crude Oil Prices On Indian Industries

1566 words - 6 pages market, establish brand recognition, and prepare for the eventual deregulation of the Indian retail petroleum products sector. Still, a requirement that foreign firms invest at least $400 million before entering the downstream market has served to limit their entry into petroleum products retailing. Shell met this requirement in early 2004, and intends to open a few retail outlets beginning in 2005.Industry Restructuring and Price DeregulationThe

Economic Picture Of Great Britain 2003 This Is An Economic Report On The United Kingdom Going Into Details Using Current 2002 Stats

3354 words - 13 pages taxation system.Tax Year 2000/2001 Yearly EarningsNI (National Insurance)0-50000%5001-1500010% on excess of 0015001 -3500024.5%35000+40%The table above depicts that the more one makes, the more one pays in actual taxes and as a percent of taxes.There are many other taxes that are paid in the UK. They have the world's highest Petroleum tax which is over 80%. A Value Added Tax (VAT) is exactly like GST which is 18% in the UK. This is one of the only