Celebrating 20 years in business, Jerry Cosgrave and Leon Byrne beside McConville Oil’s tanker
McConville Oil is run by Jerry Cosgrave who took over the business from his father-in-law Dermot McConville eight years ago in what was a very different operating time
“It was push, push, sell, sell and no-one worried about credit,” he says. In such busy times Jerry could have put another tanker on the road but now he is very glad that he did not opt for expansion. “I would be carrying significantly more overheads in a market where volumes have almost halved and there is little or no consumer confidence,” he told Irish correspondent, Aine Faherty.
McConville Oil operates just one tanker bought in 2007, which Jerry drives in addition to taking all the orders on the road, backed up by Leon Byrne, a part-time administrator in the office. In operation for 12 years, prior to Jerry’s acquisition McConville Oil had developed a reputation for reliability so he retained the name and secured a contract with Top Oil.
The bulk of business is done within a 12-mile radius of its Graiguenamanagh base in Co Kilkenny where domestic home heating oil is the main seller throughout the winter months. Over summer where once there was some road diesel business from construction accounts, Jerry now relies solely on the farming industry and might just work on the basis of a three-day week spread over five or six days. Although rewards are not massive, Dermot reports a good living which he is very happy with.
A few years ago tanks were installed in the yard and investment was made in a bottom loading skid. Now, while there are no capital spending projects in the pipeline, it is hoped that temperature compensation probes will be installed in his lorry before September. At a cost of €700 to fit, it could give a saving of €4,000 to €5,000 per year. In the future, Jerry also hopes to utilise a mobile fuel management system if a cost effective solution for the small operator is available; presently outlay for software would not be feasible.
Since January, like all oil distributors, he has adhered to strict revenue reporting guidelines on the movement of oil. Initially quite a challenge, Jerry now says that despite the extra paperwork involved, it enables him to keep a tighter control on stock movements. He does, however, remain to be convinced that this will meet its intended purpose, to grind fuel laundering practices to a halt.
As many quit giving people credit, Jerry still extends credit to his oldest customers as a form of goodwill for their continued custom. Burned by big players, he has entered into payback plans; one owing a large sum is repaying at the rate of €100 per month. “It’s better than fighting with them,” he says.
Jerry feels the future of oil is fairly secure, “especially in rural areas where gas is still not an option. Unless it becomes much more expensive, which I think is unlikely. “Most people would revert back to oil if it cost €1000 for 600 to 700 litres, which is about 20% cheaper than it currently is in Ireland. “And I think it could happen,” he says optimistically.
Four and a half stone lighter – the newly slimmed down Trevor and Andrew
Keeping busy
Eighteen months on from making its first deliveries of kerosene, the company has a real stronghold in the Wellington area of Somerset, is “very, very busy” and has grown considerably in size.
“We now have approximately 2,000 regular customers in the domestic, agricultural and commercial sectors,” said Trevor. “Although we operate within a 25 mile radius, encompassing west and south Somerset and east and north Devon, we are now trying to fine-tune it a little for ease and convenience. We have a good, loyal domestic base and pride ourselves on offering a good service.”
“We’re pretty much always on call and regularly have customers wandering in to the yard on Sundays wanting fuel. Our business cards say talk to us at any time but people assume this means we’re on site 24-7.”
Although Trevor and co-owner, Andrew Hewitt are happy to turn their hands to pretty much anything, they have found their own niche areas within the business. “I’m a bit more hands on and prefer being out on the road, making deliveries whilst Andrew’s happier in the depot doing the more administrative tasks,” explained Trevor.Family affair
It’s a real family affair for Trevor and Andrew. Trevor’s wife, Daryl, does the accounts whilst Andrew’s father, Keith, who is retired, is in charge of marketing and regularly pounds the streets, handing out leaflets. Although Trevor’s children are too young to join the business, his 12 year old son is already showing signs of having inherited his father’s entrepreneurial skills. “He’s a real wheeler dealer and has a good grip on cash flow,” Trevor joked. “Having children has had a positive effect on the business – it’s amazing how many sales we’ve had through word of mouth from scouts and cubs and various kids groups.”
In addition to family members, Monument also employs one full-time and one part-time (casual) driver and has a relief driver for when they need a little extra help.Equipment expansion
With three tankers on the books, Monument is looking to further expand the fleet. “We already have 18, 14 and 7 ½ tonne tankers but are on the lookout for another second hand 14 tonne tanker, so if anyone has one that they’d like to sell, please get in touch!!”
The company recently invested in an Alpeco loading arm for its gas oil. “It’s marvellous – it’s made a huge difference to operations.”
Although Trevor describes Monument as “an analogue rather than a digital business”, the company is looking to install some Cloud based software and expects to have Fuelsoft up and running by July 2013. The company also has a website and a Twitter account, “although we don’t tweet as much as we should,” added Trevor.Reaping the rewards
Setting up a company has also had another, rather unexpected effect. “We’ve lost four and a half stone between us,” beamed Trevor. “We’re working non-stop and eating much better than when we were working for other companies. Regular hotel trips and company meals meant that we piled on the pounds over the years.”
Liz asked Trevor what advice he had for anyone wanting to set up a fuel distribution business: “Don’t do it,” he laughed. “No seriously, be brutal with your overheads to keep them under control and be realistic with your cash flow predictions – it’s the heartbeat of the business. It’s also important to find a supplier that you can work with and luckily we have that with Inver Energy who has been very supportive. We’re working harder than we’ve ever done but we’re enjoying it! It’s like a very expensive business course – if we pass, we get to stay in business.”
Current perspectives
The recent (2011) OFT Off-Grid Energy Study assessed that approximately four million UK households were not connected to the gas grid, of which around 1.6 million use kerosene for domestic heating, representing 6% of the total heating fuel market. LPG use as domestic fuel accounted for a further circa 200,000 households. In comparison, natural gas is used by almost 20 million households and accounts for just over 80% of the heating fuel market.
In addition to its use in the domestic sector, there are estimated to be between 200,000 and 250,000 commercial heating oil users.
A snapshot of the trend in total UK domestic regular kerosene demand since the start of the millennium shows the following:
Source: DECC Energy Trends: Oil & oil products, Supply & use of petroleum products.
So, it appears that the market has moved from the range of 2.2-2.5 million tonnes/year (2.7 to 3.0 billion litres/year) to one of slightly under two million tonnes( 2.5 billion litres) in the past couple of years – although the exceptional, extended winter of 2013 is likely to result in this year’s total demand climbing back towards 2.2 million tonnes.
Against this backdrop, it was encouraging to learn that oil boiler sales were 22% higher in Q1 2013 vs. Q1 2012, and that overall 2012 sales were up on those in 2011.
What might the future hold?
To gauge future market prospects, we will consider a range of ‘what if’ possibilities, as a way of mapping out the boundaries that may define the future for the sector. To do this, an approach from probability and decision analysis will be used, which identifies three possible cases or scenarios:
→ best possible outcome, known as the P10 case- where there is only a 10% probability of things being better
→ an average outcome, known as the P50 case- where there is a 50% probability of things being better.
→ a worst possible outcome, known as the P90 case- where there is a 90% probability of things being better.
In looking at these possible outcomes, there are three underlying assumptions which are common to each case:
• that the requirements in the Code for Sustainable Homes will result in negligible new build potential for oil fired systems, so enabling little/no scope for market expansion.
• that B30K (bio kerosene) will not qualify for incentives under the Renewable Heat Incentive (RHI), given that it comprises 70% fossil fuel and so could raise questions, at least from a PR standpoint, about the true credentials of the green agenda that underlies the scheme.
• that oil boilers will be capable of meeting the maximum permissible NOX emissions’ limit of 120 milligrams per kilowatt hour set by the EU for 2018.
The future state of the market is taken to be that in 2020, the key milestone date for achievement of the GHG (greenhouse gas) emissions’ target and contribution of renewable energy sources.
Three possible scenarios for kerosene
Best Case (P10)
This is one where the sector, through initiatives such as Oilsave, is able to mount effective efforts, through promotion of improved fuel efficiencies of boilers, better insulation and lower emissions etc., that enable it to retain the lion’s share of its existing outlets. However, these fuel saving initiatives result in reductions in consumption, which are projected to average 3% per annum over 2013-2020.
From a starting point ( 2013), assumed to be circa 2.2 million tonnes ( 2.75 billion litres), this results in a decline of just over 420,000 tonnes (525 million litres) over the period, to a market of just under 1.8 million tonnes.
Average Case (P50)
This is one where the government’s various initiatives, such as the RHI and Green Deal etc., in pursuit of its green agenda, result in a measure of attrition of existing oil outlets. When coupled with the fuel reductions pursued by the sector in defence of its existing market, described above, this results in an average decline in oil use projected at 5% per annum over 2013-2020.
The reduction in this scenario amounts to 660,000 tonnes (830 million litres) to a market of just over 1.5 million tonnes.
Worst Case (P90)
This is a more extreme version of the previous case (P50), the key difference being that the government decides to pursue a much more aggressive/ ambitious approach to its green agenda and provides more generous and attractive incentives to encourage transfer from oil use.
As a result, consumption falls by 50% from its 2013 level i.e. by 1.1 million tonnes (1.4 billion litres), to a market of 1.1 million tonnes in 2020.
As already stated, these ‘what if’ scenarios represent no more than an attempt to map out what the future may hold for kerosene’s use as a heating fuel, generating a range of possible outcomes in terms of changes in demand and resulting market size. Their plausibility rests primarily in the exercise of being able to identify the boundaries that may define the market in 2020 – the future state. As the range is a substantial one, there is a higher likelihood that the market size will fall somewhere within the best/worst case scenarios for 2020.
Food for thought and, hopefully, opportunity to consider and adapt business models, as appropriate, to ensure the future viability and success of the heating oil sector – with the P50 type scenario providing a starting framework for planning purposes.
Comment on the above is invited to jane@fueloilnews.co.uk
Mick Smith, Suckling Transport
“Raising standards throughout the industry can only be a good thing, and by adding PDP to the ADR qualification, the driver will demonstrate their knowledge and skill by taking an assessment. The PDP is supported by the PDP training standard which all tanker operators will be able to use as a basis for driver training/development. The passport will be valid in line with ADR for a 5-year period with each driver subject to an annual refresher day and a written/practical assessment before it is issued.”
Spokesperson, Wincanton
“We will continue to support any initiative that seeks to improve skills and promote a more widespread adoption of professional standards across our industry. The PDP is a positive step in bringing the wider industry up to the same high standards of health & safety and training already provided by Wincanton and a number of other employers in our sector.”
Chris Dalton, Lateu Logistics
“I don’t believe anyone can be critical of any incentive that makes working safer for the employee or the general public at large. I would, however, add that the passport scheme has been driven by unions and larger companies who have in-house training schemes, derived in the first place by major oil companies when they operated fleets directly. Both parties have a vested interest in controlling the market!
“We must consider the smaller operators and local fuel distributors who don’t operate formal schemes. Some parties would argue that they operate unsafely, but these companies have not had a say in the PDP scheme. I’m sure the scheme will heighten the level of driver skill and awareness across the five identified sectors, which is a positive step, but beware the underlying intentions of interested parties.”
Anonymous
“It’s absolutely unnecessary and is purely political following the last union driven strike! This is the result of pure union politics and the outcome is simply reflecting what’s already done with petroleum delivery drivers other than the production of the new passport.”
Richard Green, DHL Supply Chain
“The PDP is designed to link with and enhance the ADR qualification, as well as to contribute to the requirement for Driver CPC hours. The passport is an industry training standard aimed at maintaining and raising the standards within the whole industry.
Share your opinion with liz@fueloilnews.co.uk.
