Fuel Oil & LP Gas Dealers
Description
Companies in this industry sell fuel oil and liquefied petroleum (LP) gas. Major companies include AmeriGas, Ferrellgas, and Star Group (all based in the US), as well as Mitsui & Co (Japan), SHV (Netherlands), and Ultrapar (Brazil).
The US and China are the two of the largest consumers of oil globally, with a total of 19 million and 16.6 million barrels per day (b/d), respectively, according to Statista. The Organization of the Petroleum Exporting Countries (OPEC) crude oil demand is expected to reach 1.4 million b/d in 2025.
The US fuel oil and LP gas dealer (fuel dealer) industry includes about 8,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $30 billion. Volatility in the price of crude oil impacts revenue for fuel oil dealers.
COMPETITIVE LANDSCAPE
Residential, commercial, industrial, and agricultural heating needs drive demand. The profitability of individual companies depends on efficient operations, low-cost purchasing, and competitive pricing. Large companies have advantages in purchasing, finance, and distribution. Small companies can compete effectively by serving a local market, offering unique products, or providing special services. Fuel dealers compete with suppliers of other energy sources, including electricity and natural gas. The US fuel dealer industry is fragmented: the top 50 companies account for about 40% of sales.
More recently, economic stagnation from the coronavirus pandemic caused oil prices to plummet as supply outstripped demand, causing gasoline and heating oil prices to fall. Petroleum has been the largest major energy source for the total annual US energy consumption, according to Statista. The US petroleum consumption has reached an average of about 20 million barrels per day (b/d) in 2023, according to the US Energy Information Administration (EIA).
PRODUCTS, OPERATIONS & TECHNOLOGY
Major products of companies in the industry include LP gas, which accounts for about 40% of the industry revenue. This is followed by products that include No.2 distillate fuel oil (35%) and automotive fuels (10%). Other products include automotive fuels, diesel fuel, as well as maintenance and repair services for home operation. LP gas dealers may rent storage tanks to customers or have portable tank exchanges. Companies may also sell, install, or service heating equipment.
Fuel oil is a distillate of crude oil, and is formed when oil is heated to a gas state and condensed. Of the six grades of fuel oil, No. 2 grade distillate is the type used for heating. LP gas is a by-product of natural gas production and petroleum refining. Extremely low temperatures or increased pressure converts gas to liquid, making it easier to transport. Fuel oil and LP gas are not interchangeable and conversion to a different fuel requires new heating equipment.
Fuel dealers generally serve suburban and rural areas with limited access to natural gas distribution networks. Many small companies are family-owned and handed down from one generation to the next. Demand for different types of fuel is regional and based on the type of heating equipment used in a particular market. Companies may consider geographical size, the number and density of potential customers, types of fuel usage, competition, typical weather conditions, and existing infrastructure for supply when deciding whether to enter new markets.
Companies use trucks to transport fuel to customer tanks. Customers may receive multiple deliveries annually and can opt for automatic deliveries. Route planning is important to control costs and to minimize miles traveled between customers.
Dealers buy fuel from oil companies, natural gas processors, and wholesalers. To deliver fuel, dealers may rely on suppliers or use trucking or rail services. Supply agreements may range from six months to three years and include minimum or maximum purchases. Since fuel oil and LP gas are commodity products, pricing is typically based on the market price at the time of the contract or delivery date, plus a differential. Dealers may also buy fuel on the spot market to meet excess demand. Because fuel oil and LP gas are tied to crude oil, prices can be volatile and companies may use contract terms, options, or futures contracts to reduce risk. Dealers may own or lease secondary storage facilities to hold fuel during periods of low demand, such as summer.
The US and China are the two of the largest consumers of oil globally, with a total of 19 million and 16.6 million barrels per day (b/d), respectively, according to Statista. The Organization of the Petroleum Exporting Countries (OPEC) crude oil demand is expected to reach 1.4 million b/d in 2025.
The US fuel oil and LP gas dealer (fuel dealer) industry includes about 8,000 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $30 billion. Volatility in the price of crude oil impacts revenue for fuel oil dealers.
COMPETITIVE LANDSCAPE
Residential, commercial, industrial, and agricultural heating needs drive demand. The profitability of individual companies depends on efficient operations, low-cost purchasing, and competitive pricing. Large companies have advantages in purchasing, finance, and distribution. Small companies can compete effectively by serving a local market, offering unique products, or providing special services. Fuel dealers compete with suppliers of other energy sources, including electricity and natural gas. The US fuel dealer industry is fragmented: the top 50 companies account for about 40% of sales.
More recently, economic stagnation from the coronavirus pandemic caused oil prices to plummet as supply outstripped demand, causing gasoline and heating oil prices to fall. Petroleum has been the largest major energy source for the total annual US energy consumption, according to Statista. The US petroleum consumption has reached an average of about 20 million barrels per day (b/d) in 2023, according to the US Energy Information Administration (EIA).
PRODUCTS, OPERATIONS & TECHNOLOGY
Major products of companies in the industry include LP gas, which accounts for about 40% of the industry revenue. This is followed by products that include No.2 distillate fuel oil (35%) and automotive fuels (10%). Other products include automotive fuels, diesel fuel, as well as maintenance and repair services for home operation. LP gas dealers may rent storage tanks to customers or have portable tank exchanges. Companies may also sell, install, or service heating equipment.
Fuel oil is a distillate of crude oil, and is formed when oil is heated to a gas state and condensed. Of the six grades of fuel oil, No. 2 grade distillate is the type used for heating. LP gas is a by-product of natural gas production and petroleum refining. Extremely low temperatures or increased pressure converts gas to liquid, making it easier to transport. Fuel oil and LP gas are not interchangeable and conversion to a different fuel requires new heating equipment.
Fuel dealers generally serve suburban and rural areas with limited access to natural gas distribution networks. Many small companies are family-owned and handed down from one generation to the next. Demand for different types of fuel is regional and based on the type of heating equipment used in a particular market. Companies may consider geographical size, the number and density of potential customers, types of fuel usage, competition, typical weather conditions, and existing infrastructure for supply when deciding whether to enter new markets.
Companies use trucks to transport fuel to customer tanks. Customers may receive multiple deliveries annually and can opt for automatic deliveries. Route planning is important to control costs and to minimize miles traveled between customers.
Dealers buy fuel from oil companies, natural gas processors, and wholesalers. To deliver fuel, dealers may rely on suppliers or use trucking or rail services. Supply agreements may range from six months to three years and include minimum or maximum purchases. Since fuel oil and LP gas are commodity products, pricing is typically based on the market price at the time of the contract or delivery date, plus a differential. Dealers may also buy fuel on the spot market to meet excess demand. Because fuel oil and LP gas are tied to crude oil, prices can be volatile and companies may use contract terms, options, or futures contracts to reduce risk. Dealers may own or lease secondary storage facilities to hold fuel during periods of low demand, such as summer.
Table of Contents
- Industry Overview
- Quarterly Industry Update
- Business Challenges
- Business Trends
- Industry Opportunities
- Call Preparation Questions
- Financial Information
- Industry Forecast
- Web Links and Acronyms
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