Donall O’Connor, Value Oils
“As Northern Irish oil distributors, we are part of a saturated supply market where consistent pressure on margins exists for all but a few high demand months o the year.
Buying groups typically thrive where distributor numbers and supply options are low and where healthy margins are traditionally achieved – Northern Ireland is no longer such a place – even in periods of decent demand, the number of distributors far outstrips demand.
In Northern Ireland many small distributors work off margins which barely cover variable costs for most of the year. A quick check on the Northern Ireland/UK price checker websites will verify that Platts-plus with a pathetic margin of 3ppl is not uncommon on 500 litres. Nowhere else in the UK mainland would such margins be tolerated by any worthy distributor.
Buying groups, propped up with local government and council financial support, are not really a welcome addition to the current melting pot. The NIHE, which has a switch them to gas policy, has deemed fit to select the oil distributor trade for special attention. Where is the government support for gas, electricity, meat, milk and bread buying clubs?
Oil buying clubs will continue to pop up, come and go and remain in existence across Northern Ireland. But, when government and local council funding runs out, the effort will ease for the simple reason that there’s not a decent margin to work with in the first place. In the long term buying groups will lead to more damage in an already fragile and fragmented market. Whilst I do not agree with the NIHE view on more oil buying clubs, there will inevitably be more – batten down the hatches!”
For further comment see the Value Oils blog – www.valueoils.com/blog/home-heating/heating-oil-buying-groups-2/
Joe Bradley, Bradley Fuels
“I don’t understand how any supplier could make any money from oil buying groups. I did it once and it was a waste of time and money. I just about covered my costs but some guy from 30 miles away saw fit to undercut me – never again!!”
David Blevings, Northern Ireland Oil Federation (NIOF)
“Oil buying clubs have their place – assuming they’re set up correctly, members have realistic expectations of savings and delivery addresses are centred around a local village or cluster of homes that offers logistical savings to the distributor.
“We need to be careful that consumers are given the correct information: the leaflet prepared by the NIHE is both supportive and informative. Prior to this guidance document many oil clubs made savings comparisons based on the cost of heating oil supplied in 20 litre drums – which included the cost of the drum – something in the region of £1 per litre!
“Rather than join a club many consumers are now filling drums they’ve acquired over the last few years at kerosene pumps at their local petrol station. This is big business in Northern Ireland and is now seen by many oil users as a viable ‘budgeting’ method.
“NIOF is concerned at the growth of the drum business as there are clear health & safety issues when carrying drums of flammable liquid in cars and, the potential for environmental contamination from drips/spillages. Small oil drums should be for emergency use only.
“While we accept that clubs do have a role to play by offering savings to clients buying small drops, we’re convinced that the future for oil consumers is a viable payment plan or Pay as you Go system similar to that for gas and electricity.
“We’re not against oil clubs per se, but think consumers should be given the correct information on actual savings. As a responsible industry NIOF members already offer numerous products to assist consumers to budget for their annual fuel requirements.”