UK
more vulnerable from disruption to oil supplies
Petrol station closures and cutbacks in storage capacity have made Britain more vulnerable to oil supply disruptions, the Government has been told.
19
March, 2013
The
extensive rationalisation, coupled with the rundown in storage depots
and refineries has reduced the amount of petrol and diesel stocks at
filling stations by the equivalent of two days demand.
It
also means the average time it takes a motorist to get from home to
the nearest petrol pump has doubled from five to 10 minutes.
Currently,
stock levels are enough to meet six to eight days demand but, with
some operators running below capacity to save money, total storage
capacity could be lower, according to data produced by business
advisers Deloitte for the Department of Energy and Climate Change
(DECC).
The
report is one of two covering the shake-out in the petrol retailing
market resulting from the entry of supermarkets and the demise of
independent retailers.
The
second, produced by the Office of Fair Trading, rejected arguments
from independents that competition in the market was not working
because supermarkets with their purchasing power controlled the
market.
Deloitte
was asked to assess risks to the security of supply and the impact on
motorists of the market upheaval and, although the consultants had
reservations, DECC is satisfied the retail market can cope with
disruptions.
John
Hayes, energy minister, said the report showed the retail sector had
more than enough stocks to “meet fuel supply shocks” before
contingency measures were taken.
But
the Petrol Retailers Association, dismayed by the OFT report on the
competition issue, claimed the Deloitte analysis demonstrated that
the majority of forecourts were running with “dangerously low”
levels of reserves
.
The
total number of petrol sites has slumped by 75pc since 1970 from
37,500 to just under 8,700 in 2011 as a result of the supermarket
invasion and rundown in company-owned and independent outlets.
The
rate of closures has slowed over the past six years but between 2001
and 2011 storage capacity was reduced by 15pc-20pc, equivalent to two
days demand.
Tesco,
Sainsbury’s, Asda and other supermarkets control around 40pc of the
£47bn-a-year petrol and diesel market from just 15pc of sites.
The
consultants estimate that further closures could reduce stocks to
less than six to eight days cover. Companies are reluctant to
increase capacity because it would be expensive.
The
consultants see little relief for independent operators due to
supermarket competition and new types of contract offered by
suppliers that reduce margins and increase wholesale prices.
Another
50 supermarket sites have been earmarked as potential sites for
petrol forecourts.
The
consultants are also warning about further fragmentation in the fuel
supply chain as BP, Shell, Esso, Total and other major oil companies
either sell or close their retail outlets and reduce refinery
capacity.
The
UK Petroleum Industry Association has already told the Government
that the loss of further refinery capacity after the closure of two
plants in the past three years would pose a “serious risk to energy
security of supply and resilience”.
An
imbalance in the production mix means that Britain exports petrol but
imports large quantities of diesel and aviation fuel.
The
consultants say that, while the market changes had improved the
efficiency of the supply chain, a reduction in spare capacity had
damaged the resilience of the system to supply disruption.
High
volume supermarket sites buy most of their supplies from importers
but, with limited storage, need frequent refuelling. That means that
during supply disruptions they will quickly run out of petrol.
The
consultants said that, while the market changes had improved the
efficiency of the supply chain, a reduction in spare capacity
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