While revenue generally grows during periods of price growth, profit margins usually contract
New York, NY (PRWEB) July 21, 2014
Over the past five years, greater demand for vehicle fuel and higher prices have boosted revenue for the Gas Stations with Convenience Stores industry. Consumers generate most of this industry's sales, while consumer demand has risen with growth in per capita disposable income and consumer confidence. Moreover, vehicle use has increased since 2009, as indicated by an annualized growth in total vehicle-kilometres over the five years to 2014. Additionally, trade growth has spurred demand for diesel fuel from trucking companies. As a result of these trends, sales volumes of regular gasoline and diesel fuel have risen at annualized rates, according to Statistics Canada. Fuel prices have also increased over this period due to higher crude oil prices. As such, industry revenue is anticipated to rise over the five-year period, including a projected decline in 2014.
According to IBISWorld Industry Analyst Hester Jeon, “This industry is highly competitive, with very few establishments owned by major oil companies or refineries despite the prevalence of their branding at retail stations.” 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. Instead, operators absorb some of these costs to remain competitive. While revenue generally grows in 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 gasoline.
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 Jeon. Still, general economic growth indicated by rising incomes, consumer confidence and trade activity are expected to lift demand for fuel. Higher fuel prices will also help drive revenue growth. As such, industry revenue is forecast to rise at an average annual rate in the five years to 2019.
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).
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