Higher oil prices will influence fuel pricing, stimulating revenue growth and tempering consolidation.
New York, NY (PRWEB) May 12, 2014
Driven by fluctuating oil prices, revenue for the Fuel Dealers industry has been volatile over the five years to 2014, with revenue expected to grow an annualized rate. In 2009, sluggish sales volumes and lower fuel prices eroded revenue. Coming off this recessionary low, subsequent rebounds in prices and cold weather conditions, which spur demand for heating fuels, helped revenue recover in 2011. Yet, in the following years, declines in crude oil prices have caused revenue to slowly fall, including an anticipated decline in 2014.
While the recent economic upswing helped the majority of industry operators, especially larger players, those that have implemented wholesaling processes have gained a substantial advantage during the past five years. Although fuel dealers can usually pass on fuel cost increases to consumers, huge price fluctuations can disrupt downstream demand. For example, players that serve small residential markets can lose out if enough households switch to other fuels, such as electricity or natural gas. Therefore, according to IBISWorld Industry Analyst Antal Neville, “in response to price volatility, many industry operators consolidated to handle increased fuel volumes and to distribute these products using wholesale strategies.” By handling more volume, companies can draw up long-term supply contracts, guaranteeing purchases at a certain price point. Consequently, “mergers and acquisitions have become increasingly common in an environment favoring larger players,” says Neville. As a result of this trend, the number of establishments declined an annualized rate during the five years to 2014.
The Fuel Dealers industry has low market share concentration. Moving forward, revenue will remain highly sensitive to trends in oil prices during the five years to 2019. Oil prices are forecast to mildly increase during this period, benefiting industry operators. Higher natural gas prices will reduce competition as well. However, increasing economic activity worldwide will support rises in oil prices, despite some growth in output from the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers. Overall, higher oil prices will flow down to fuel pricing, boosting industry revenue at an average annual rate during the five years to 2019.
For more information, visit IBISWorld’s Fuel Dealers in the US industry report page.
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IBISWorld industry Report Key Topics
The Fuel Dealers industry sells heating oil, propane and other fuels directly to end users. Companies 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
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