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The petrol industry in the United Kingdom – UK, has seen various changes in the last ten to five years. The market shares and market structure will be examined in more detail for the last five years with representing the main changes in the petrol industry and market shares. The UK petroleum market is composed of various brands. Over the five years similar names have been present in the market. The shares of the petrol companies and retail companies have been changing along with the different composition of different firms in the sector. The numbers of Petrol filling stations - PFS have been on the decline from the year 1970 onward until the recent years. The UK petroleum retail market has seen various trends and development with changing ownership fuel market. Various PFS closed and various changed. The biggest companies in the petrol sector have been gaining slightly bigger market shares.
The UK petrol market was in 2010 dominated by 15% market share in the hands of BP, 14.6% in the hands of Tesco, 12.8% in Shell, 10.6% Esso, 8.9% in Morrisons and 8.5% in the hands of Sainsburys (Renshaw, 2010). In the year 2011 15.1% of market share were in the hands of Tesco, 14.8% in the BP, 12.4% in Shell, 10.6% in Esso, 9% in Morrisons and 7.3% in Sainsburys hands. The 38.4% of the market was owned by hypermarkets, 33.3% by dealers and 28.3% by companies (Renshaw, 2011). In the year 2012 Tesco has the greatest market share – 15.5%, following by 14.9% share of BP, 12.1% market share by Shell, 10.3% market share by Esso, 9.2% of market share by Morrisons and 8.8% by Sainsburys. Little change has been seen from previous year in the area of market ownership (Renshaw, 2012). In the year 2013 Tesco gained 16% of the market share, BP 15%, Shell 14.1%, Esso 10.4%, Mirrisons 9.7% and Sainsburys 9.4%. Ownership has changed where hypermarkets owned 40.5% of the fuel market share, dealers 31.9% and oil companies 27.5% (Renshaw, 2013). The biggest market share in 2014 - 16% in the country has Tesco, following by BP with a 13.9% market share, Shell 12.1% market share, Esso 10.8%, Sainsbury 10.3% and others with less than 10% of market share were ASDA, Texaco, Certas energy, Jet, Murco, Unbranded, Minor brand, Harvest energy, Maxol, Food store, Topaz, Gleaner, Star, Solo, Thamex and Rix. The ownership of the UK fuel market in 2014 showed that 43.5% of fuel market was in the hypermarket, 32.7% in dealer and 24.8% of the oil companies’ ownership. The top ten players in the UK petroleum industry are accounted for around 90% of the industry revenue and top five more than half of the revenues. Great number of sites has changed ownership from oil companies to the dealers (Renshaw, 2014). The last available report for the year 2015 shows the Tesco market share at 16.5%, BP 14.8, Shell, 13.5%, Esso 10.8%, Sainsburys 10.3 and Morrisons 10%. The fuel market ownership was seen in the same scale with the major ownership from hypermarkets, dealers and oil companies (Renshaw, 2015).
The sales by the major petrol companies have been changing. The average annual sales from shops on petrol stations in the United Kingdom will be presented for the fife major petrol companies for the last couple of years and hence, Tesco, BP, Shell, Esso, Sainsburys and Morrsisons. Tesco average annual shop sales in 2015 were 500.000£, in 2014 500.000£ and in 2013 501.000£. The company BP average annual shop sales were in 2015 795.000£, in 2014 795.000£, and in 2013 774.000£. For the company Esso were in 2015 925.000£, in 2014 929.000£, in 2013 986.000£ and for the Shell were in 2015, 582.000£, in 2014 574.000£ and in 2013 575.000£. Morrisons average annual shop sales were also growing and were in 2015 397.000£, 2014 396.000£, in 2013 391.000£ and the same increase trend in the shop sales was seen in the Sainsuburys company were in 2015 582.000£, in 2014 582.000£, 567.000£ avarge annual sales (Renshaw, 2015-2013). The trend in sales shown by the average annual shop sales has been increasing. The number of shops did play a role in the sales, but were not the final factors that would contribute to the higher sales. It is obvious that the sector is improving from the economic crisis where the sector saw lower demand.
The type of petrol market structure is influenced by pricing, barrier to enter, efficiency and competition. In the petrol industry, we can see that there is no perfect competition since the major oil companies have almost all national revenues. There are few sellers and a lot of buyers. The oil market can be defined as the oligopoly where exists competition among few large firms. The UK petrol sector is a typical oligopoly, since ten major firms account for 90% of the market share. Fuel retailing in the UK is dominated by few major suppliers. There are high barriers of entry. Their homogenous products are being provided, for different price and the companies have control over the price. The UK retail petrol market has become more competitive with the increased entry of the supermarket chains. After the long period of time of closing the companies and satiations the numbers are seen on the increase since the year 2011 onward. The trend in the market is that the major companies are shifting among on the scale based on the market share and revenues, but were constantly present on the market in the last 5 years. The fluctuation of prices is known in the market where very inelastic demand for the petrol product exists.
Economic diagram how the price and output is determined by a typical form of one petrol company which is operating in the market with the imperfect competition cannot be shown with the supply and demand diagram. The economic diagram to explain the typical petrol firm could be Kinked demand curve shown in figure 1.
Figure 1 Kinked demand curve
Source: Gillespie, pp. 42.
The quantity demanded for oil will result in little change in price. The petrol firm aims at competing with other firms in order to make more profit independently. There are few dominating firms and their behavior will depend on assumptions what other firms will do. If one firm increases the price other firms do not follow, but if the prices are decreasing other will do the same. From the graph it is seen that price does not change very much and firms are competing with promotions of other non-petrol related products, which is seen from the petrol firm’s advertisements (Gillespie, pp. 42). The oil and petrol prices do not directly impact the price in the country because of the stock of the petrol at the previous prices and also because the refined sources present the minority of the retail price of petrol. The prices are agreed in front and majority of the price of petrol is government petrol duty and VAT. The rising oil prices result in greater world demand, wars and other natural and man-made disasters. The fact that the petrol firm cannot be shown with the supply and demand curve lies in the relatively inelastic demand in comparison to the price.
References
Gillespie, Andrew. 2001. Advance Economics Through Diagrams. Oxford: Oxford University Press.
Renshaw, Arthur. 2010. Fuel Market Review 2010. Fuel Market Review. [online] Available at: <http://www.forecourttrader.co.uk/cp/1/FCT_fuel_market_review_06_2010.pdf> [21. Apr. 2016].
Renshaw, Arthur. 2011. Fuel Market Review 2011. Fuel Market Review. [online] Available at: <http://www.forecourttrader.co.uk/files/Fuel_Market_Review/FCT_fuel_mkt_review_ 2011_low.pdf> [21. Apr. 2016].
Renshaw, Arthur. 2012. Fuel Market Review 2012: All Change in 2012. Fuel Market Review. [online] Available at: <http://www.forecourttrader.co.uk/files/Fuel_Market_Review/FCT_Fuel_Mkt_Revie w_2012_low.pdf> [21. Apr. 2016].
Renshaw, Arthur. 2013. Fuel Market Review: Optimistic Outlook. Fuel Market Review. [online] Available at: <http://www.forecourttrader.co.uk/files/Fuel_Market_Review/fuel_market_review_20 13_low.pdf>[21. Apr. 2016].
Renshaw, Arthur. 2014. Fuel Market Review 2014: Reversing the Trend. Fuel Market Review. [online] Available at: <http://forecourttrader.co.uk/files/Fuel_Market_Review/Fuel_Market_Review_2014.p df> [21. Apr. 2016].
Renshaw, Arthur. 2015. Fuel Market Review 2015: Dealers Taking over. Fuel Market Review. [online] Available at: <http://forecourttrader.co.uk/files/Fuel_Market_Review/Fuel_Market_Review_2015.p df>[21. Apr. 2016].
