Revenue will rise as industrial petroleum consumption increases with stronger export demand
Los Angeles, CA (PRWEB) June 23, 2013
The Gasoline and Petroleum Wholesaling industry experienced very volatile growth over the past five years. While petroleum consumption was relatively stable, product prices fluctuated widely due to the global economic downturn and domestic infrastructure shortages. Industrial petroleum consumption was particularly volatile, because domestic manufacturers are dependent on exports to the United States and global markets. “The 2009 recession sharply lowered demand for Canadian exports, which caused downstream firms to cut back on petroleum purchases,” says IBISWorld industry analyst David Yang. “As a result, industry revenue fell as much as 17.2% over that year.” Since then, growing industrial output has buoyed petroleum consumption. Prices also recovered as global demand normalized. As a result, IBISWorld expects industry revenue to increase at an average annual rate of 4.6% to $79.9 billion in the five years to 2013.
Gasoline and Petroleum Wholesaling industry revenue recovered strongly from the recession. However, revenue was driven by price and demand growth over 2010 and 2011. Since 2011, domestic crude oil and petroleum prices have stagnated. “Pipeline infrastructure shortages constrained North American petroleum exports, lowering domestic crude oil and prices,” adds Yang. “Over the past two years, domestic petroleum prices were considerably lower than international petroleum prices.” As a result, wholesalers experienced minimal revenue growth. In 2013, petroleum product prices are estimated to fall, causing revenue to contract 2.0% over the year.
The industry has a low level of market share concentration. The high level of internal competition and low product differentiation makes it very difficult for any one firm to gain significant market share in this industry. Typically, industry firms operate regionally because it minimizes transportation costs associated with product distribution. Firms that supply products across the country would further cut into already-low profit margins by incurring significant distribution costs. Nevertheless, market share concentration has moderately increased over the past five years. Industry operators have steadily consolidated to bolster profit margins through economies of scale. Larger firms fared better during the recession, due to greater market power to negotiate favourable prices with upstream suppliers and downstream customers.
Over the next five years, this industry is projected to experience stable revenue growth, due to strengthening demand for petroleum products. In particular, industrial petroleum consumption will grow as global demand for Canadian exports accelerates. The scheduled expansion of pipeline infrastructure will also bolster petroleum exports, thereby raising petroleum prices. As a result, IBISWorld forecasts that industry revenue will increase at an average annual rate of 3.3% to $93.8 billion. Profitability will also moderately increase, because steadily growing demand will allow industry firms to pass on purchase costs to downstream customers. For more information, visit IBISWorld’s Gasoline and Petroleum Wholesaling in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry purchases petroleum products from petroleum bulk stations and sells these products to retailers, including gas stations, car parts retailers, warehouses, superstores and supermarkets, manufacturers and natural-gas retail distributors.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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