While revenue generally grows during periods of price growth, profit margins usually contract.
Los Angeles, CA (PRWEB) December 10, 2013
During the past five years, increased fuel demand and price have boosted revenue for the Gas Stations with Convenience Stores industry. According to IBISWorld Industry Analyst Hayden Shipp, “Consumers generate most of this industry's sales, and consumer demand has risen during the period with growth in per capita disposable income and consumer confidence.” Moreover, vehicle use has increased since 2008, as indicated by 1.4% annualized growth in total vehicle-kilometres. Additionally, trade growth has spurred greater demand from trucking companies. As a result of these trends, sales volumes of gasoline and diesel fuel have risen at annualized rates of 0.8% and 1.3%, respectively, according to Statistics Canada. Crude oil price growth has also spurred fuel price increases to further elevate sales. As such, industry revenue has risen at an annualized rate of 1.3% over the past five years. In 2013, revenue is expected to grow at the similar pace of 1.5%, to $47.8 billion.
This industry is highly competitive, with very few establishments owned by major oil companies or refineries, despite the prevalence of their signage. Rather, most stations sell large suppliers' fuels under branded contracts. As a result, growth in fuel wholesale costs, which are linked to the price of crude oil, are not entirely passed on to consumers; operators absorb some of these costs to remain competitive. While revenue generally grows during periods of price growth, profit margins usually contract. As such, volatile and rising oil prices have dampened profit margins over the past five years. Persistently low profit margins have accelerated the rate at which major oil producers have divested their retail businesses. Such businesses are increasingly owned by independent operators and convenience store chains that derive most of their revenue from gas.
As a result of volatile and rising gas prices, consumers have reduced their dependence on fossil fuels, as indicated by drastic improvements in new vehicles' fuel efficiencies. “This threat to industry revenue will gather force over the next five years, due to continual reductions associated with fuel-efficient vehicle ownership,” says Shipp. Still, general economic growth indicated by rising incomes, consumer confidence, employment and trade will heighten demand for fuel. Growth in fuel prices will also boost sales. As such, industry revenue is forecast to rise in the five years to 2018.
For more information, visit IBISWorld’s Gas Stations with Convenience Stores in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry is made up of establishments that retail automotive fuels as well as a limited line of merchandise in a convenience store setting. Industry establishments may also provide automotive repair services. This industry is distinct from the Convenience Stores industry and the Gas Stations industry (IBISWorld reports 44512CA and 44719CA, respectively).
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
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