Higher oil prices will flow through to fuel pricing, stimulating revenue growth
Los Angeles, CA (PRWEB) October 11, 2012
Driven by fluctuating oil prices, the Fuel Dealers industry's revenue has been volatile over the five years to 2012, averaging growth of 1.7% per year to about $44.7 billion. For the most part, revenue depends on fuel prices, which are closely correlated to crude oil and natural gas prices. According to IBISWorld industry analyst Tony Danova, “at the beginning of the five-year period, revenue rose strongly, as increasing economic activity drove up fuel prices.” Then, in 2009, sluggish sales volumes and much lower fuel prices eroded these gains. However, a subsequent rebound in prices and cold weather conditions, which spur demand for heating oils, helped revenue pick back up 10.0% in 2010. As the global economy gains steam, fuel prices are expected to increase in 2012, boosting revenue an estimated 4.6% over the year.
The recent upswing in the economy has helped the majority of industry firms, though those that have implemented wholesaling processes into their business model have benefited more substantially over the past five years. For example, many direct-selling market segments experienced thinning profit margins over the past five years, as firms were unable to pass down rising fuel prices to end consumers. In response to price volatility, many industry firms consolidated to handle more fuel volume and distributed this fuel through wholesale strategies. “By handling more volume, these firms eliminated some of the risk that comes from passing along costs to consumers,” says Danova. While the Fuel Dealers industry is made up of several small, independent operators that sell liquefied petroleum (LP) gas and heating oil, the strategy of adopting wholesaling processes has been much more conducive to larger industry firms that have the capacity to take on a larger scale of operations. Major player UGI Corporation and its AmeriGas brand of dealers, for example, have increased market share of the past five years by increasing operations. As a result of consolidation, the number of establishments has grown only marginally in the five years to 2012.
Over the five years to 2017, revenue will remain highly sensitive to trends in oil prices. Oil prices are forecast to rise over the next five years, benefiting industry operators. Increasing economic activity worldwide will underpin the increase in oil prices, despite some growth in output from the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers. In general, higher oil prices will flow through to fuel pricing, pushing up the industry's revenue consistently over the next five years. Consolidation is also projected to continue over the period, as volatile prices for propane and heating oils encourage firms to purchase other companies in an attempt to reduce revenue fluctuations. For more information, visit IBISWorld’s Fuel Dealers in the US industry report page.
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld
Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189
IBISWorld industry Report Key Topics
This industry sells heating oil, propane and other fuels directly to end-users. Firms also deliver heating oil, propane and other fuels, such as autogas and kerosene, to domestic and commercial premises.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.