Negotiating the swings and roundabouts of fuel distribution

Following the very mild winter of 2011/12, many pundits were predicting that 2013 would see a number of distributors exit the business. Largely due to a winter that extended up until May over which time sales of kerosene rose, this did not happen.

David Blevings
David Blevings

An increase of 18% in kerosene imports was reported by Belfast Harbour for the first six months of 2013 compared to 2012 and, over the same period, statistics from the National Oil Reserves Agency (NORA) show an increase of 20% on Republic of Ireland kerosene imports. While this appears to be good news for local distributors, remember this only puts us back to ‘normal’ as we saw these sorts of decreases in 2011/12….
The oil sector in Northern Ireland does still enjoy a dominant market share at around 68%; but this is continually under threat from alternative fuel sources. The volatile nature of global oil prices and the ever changing weather patterns continue to make this a difficult market to predict with any certainty. Planning, forecasting and margin management are becoming even more important given the unpredictable demand.
The drum still beats as oil boiler replacement marches on
Another threat to distributor businesses is the continued growth of the 20-litre drum market. (See the report from Donall O’Connor, Value Oils in last month’s Fuel Oil News) Numerous consumers now keep a couple of drums and refill these at forecourt kerosene pumps for a minimal premium over tanker delivery cost. Given the risk to passengers and the potential for environmental damage, this is not a safe way to carry kerosene. However, many consumers see this as a type of budget payment scheme!
With its mixed reviews, we’re very fortunate that the Northern Ireland government didn’t follow Great Britain’s lead on Green Deal. Minister McCausland listened to local advice and introduced a straightforward boiler replacement programme. Launched in autumn 2012, the scheme offers consumers a grant of up to £1000 to replace a boiler over 15 years of age. The good news is that the majority of boilers being installed are new oil condensing boilers. At the end of August, 7,000 new boilers had been installed – of these 5,750 are new oil condensing boilers. In a difficult economic period, this has been welcome news for those installing oil.
Meeting increased energy obligations and driver requirements
There’s little doubt that this scheme has added to the news from OFTEC that boiler sales were up 23% for the first six months of 2013, compared to the same period in 2012. This ties in with and helps the oil sector demonstrate compliance with the Energy Services Agreement. The Northern Ireland Oil Federation (NIOF) signed up to this voluntary scheme and members have been giving energy efficiency advice and delivering flyers to promote the boiler replacement scheme. The voluntary agreements are currently under review and the Assembly has agreed in principle to move to an Energy Supplier Obligation. This would basically put a levy on fuel importers that would then ‘pay’ for energy efficiency works. Some argue that a levy will increase energy costs to the consumer further but government are keen to see more energy improvement measures introduced, especially for fuel poor homes.
Looking ahead to this winter and beyond, we’re facing new requirements for drivers in the form of the Petroleum Driver Passport. Apparently this will complement the ADR and Drivers CPC although many distributors see it as another requirement that may not be enforced and one that could push costs up further for legitimate business.
Retaining customers and promoting the NIOF customer charter
As the winter heating season approaches, customer retention must play a key part in an effective marketing strategy. Given the current economic climate, flexibility in payment terms is a must – direct debit, electronic payments and monthly top ups – are all essential retention tools. Rather than lose a customer, invite them in to discuss payment plans, and if you see an elderly boiler advise its owner about the boiler replacement programme.
Introduced last year, the NIOF Customer Charter provides Northern Ireland oil consumers with a guide to the services they can expect to receive from its members, and it gives access to a complaints process. The Consumer Council has indicated that it will publicise support for the Charter before the winter period. This is good news for NIOF members and consumers as it allows us to compete on equal service terms with other energy providers.
Fuel Oil News would like to thank David Blevings, NIOF executive director for this article