Fuel for thought…

stormy clouds
The oil heating market has contracted significantly over recent years, because of what can legitimately be described as the ‘perfect storm’, says marketing consultant John Switzer, who works with Carbery Plastics. 
The market for heating oil equipment has contracted markedly in just a few years.  Whilst there are no continuously updated statistics to show what is happening across the industry, the general consensus is that sales have declined significantly.
Ask any oil tank installer today ‘How’s business?’ and more often than not, the best response you can hope for is ‘Could be better’.
We need to recognise that, heating oil may no longer be the default choice of householders, be they on or off the mains-gas network. Instead, we have to compete for such business against both established and new energy sources.
The perfect storm
Some installers I speak to are reporting year on year volume decreases of up to 30%. The new build sector, which once represented c.20% of the market, has virtually dried up – a victim of the housing slump, a decrease in public sector spending and general economic uncertainty. The number of replacement installations has also declined, due to the understandable reluctance of consumers to part with their hard earned cash. ‘Make do and mend’ is today the default position of many homeowners and householders.
Away from the domestic market, the commercial tank market is at something of a low ebb too. This follows the introduction of environmental legislation in England and Scotland, which required tens of thousands of tanks to be replaced.  As a result, the commercial tank population is unusually young, and I would expect it will be a decade or more, before we see any significant uplift in demand. 
It’s also fair to say that issues surrounding tanks supplied by a number of manufacturers have also impacted upon our industry. Such matters have previously and extensively been discussed elsewhere and need no repetition here. But suffice to say, public confidence has taken something of a knock.
And of course, we must also consider the impact of renewables upon the industry, whilst also taking care not to overstate its significance. Many renewable technologies are inherently incompatible with the high temperature heating systems in use at existing homes throughoutGreat BritainandIreland. Therefore, they are unlikely ever to become a default choice at anything other than a small number of existing properties.
It’s not all doom and gloom
Despite the obvious challenges facing the industry, it’s important not to paint too bleak a picture. Some renewable technologies (e.g. solar) can of course complement existing oil heating installations. And in Northern Ireland, The Control of Pollution (Oil Storage) Regulations (Northern Ireland) 2010 continues to drive tank the market forward, as too does the recently announced Boiler Scrappage Scheme.
Meantime inWales, discussions have commenced with a view to enacting similar oil storage regulations to those now in force in the rest of theUK. At Carbery, we would hope that prior to the formulation of new Welsh regulations, the effectiveness of existing regulations in other jurisdictions will be closely examined. InEngland, since new fuel storage regulations came into full effect in 2005, there has been a welcome reduction in the number of oil related pollution incidents. Bunded tanks were of course a cornerstone of these regulations. But, we would ask, how much of this reduction was caused by bunding? And how much would have occurred anyway because of the installation of new storage tanks, irrespective of whether they were bunded or single skinned?

“A lower cost alternative to mandatory bunding, could be the continued permissibility of single skin tanks, combined with mandatory annual inspections and product replacement after a predetermined period of time”

 A lower cost alternative to mandatory bunding, could be the continued permissibility of single skin tanks, combined with mandatory annual inspections and product replacement after a predetermined period of time e.g. 15 years, 20 years etc. Clearly, the benefits and drawbacks of such an approach need to be considered further. But assuming there would be no detrimental impact upon the environment, such an initiative would reduce capital investment costs and create a welcome and ongoing revenue stream for storage tank installers.
Sustainable growth
Beyond Northern Irelandand Wales, opportunities do still exist for technicians and manufacturers to successfully and sustainably grow their business. Across the UK, we are working with a number of heating oil technicians, who appreciate Carbery’s commitment to growing its business through its customers.
Whilst no manufacturer can ever guarantee exclusivity to any customer, Carbery seeks to avoid a scenario, whereby our product is almost as readily available as Coca Cola. Such a distribution strategy may work well for impulsive purchases such as soft drinks, but for oil tank installers it can prove disastrous. A ‘Dutch auction’ can result, whereby multiple installers are left to slug it out on the basis of price… in the absence of product differentiation and at the expense of margin and profitability. Not surprisingly, in a market typified by oversupply and low demand, a growing number of responsible installers value our approach to sustainable product distribution and marketing.
In the Republic of Ireland, Carbery is also piloting an Installer scheme, whereby we generate leads and back sell on behalf of technicians who demonstrate a preference for our products. It’s potentially a real win-win for all concerned. It engenders loyalty to our products, helps to ensure installations are completed correctly and recognises and rewards responsible technicians. Once the scheme is established in Ireland, we expect to roll it out elsewhere too.
Such initiatives are indicative of the long-term approach Carbery takes to its chosen markets and supporting responsible technicians, who share the company’s long-term commitment to the industry.
Testing times
A similarly long term commitment also underpins Carbery’s approach to product development and manufacturing too. Whilst we recognise the importance of a competitive product offering, we also understand this cannot be at the expense of quality. Our tanks are characterised by both a greater wall thickness than some competitors and a greater material shot weight than some other tanks on the market, creating products, which are ‘built stronger to last longer’. In addition to a zero tolerance approach to the use of inferior and sub-standard recycled polymers, Carbery also believes in extensive product testing prior to releasing any new product into the marketplace.
For new products, testing is initially undertaken in-house, before product is sent to Impact Laboratories in Grangemouth for testing and certification in accordance with both OFTEC’s OFS T100 standard and European Standard EN13341. Many installers and technicians over recent years have got wise to the fact that just because a tank has an OFTEC logo on it – and let’s face it, most tanks do – it doesn’t necessarily mean the product has ever been tested, never mind OFCERT licensed.  We will never launch a tank until we’re confident it exceeds such requirements and we note installers increasingly welcome this responsible approach.
As a business, which has been around for over three decades, we remain firmly committed to the oil heating industry and will remain committed in the decades ahead. However, for our industry to grow and prosper will require us all to do things differently in the future, than we do today.
We need to recognise that, heating oil may no longer be the default choice of householders, be they on or off the mains-gas network. Instead, we have to compete for such business against both established and new energy sources.
That requires vertically integrated thinking, from the company that fills the tank, to the technician, which services the system on an annual basis. It doesn’t necessarily mean grandiose promotional campaigns and the expense that goes with them. But it does mean that as an industry, we need to better understand our customers, communicate with them more effectively and proactively offer considered solutions to their space and water heating requirements. And we need to recognise that such solutions will not always engender government support. However, by effective marketing, lobbying and promotion, our industry can head off the worst excesses of over-regulation and sometimes ill-considered policy decisions at a European, national and regional level.
With over 1.5 million heating oil installations throughout these islands and millions more across Europe, the oil storage tank industry and the oil heating industry will survive for decades to come. But on the basis of current evidence, it will probably bear little resemblance to the industry that many of us have known for the bulk of our working lives. Such change doesn’t have to be a threat and indeed at Carbery, we see it as an opportunity both for manufacturers, for installers and for continued product and service innovation.