Colonial Pipeline Competition
Now Viewing Colonial Pipeline's competition in: Petroleum Wholesale Distribution (primary)
Recent Developments
Fleet of Electrics will Change Demand - Demand for gas, a major product for petroleum wholesalers, may be impacted significantly as production of plug-in hybrid cars begins. At least three major auto manufacturers, including Toyota, Nissan, and GM, plan to offer plug-ins by 2010, which will allow consumers to drive up to 40 miles without using any gas. While the impact on gas demand isn't likely to be immediate, if the cars are reliable and become popular, demand for gas could decrease.
Refiner Worries Could Impact Wholesalers - Many wholesalers depend on oil refiners for fuel products, but refiners are running up against multiple roadblocks trying to meet expected future demand increases. As refiners seek to expand operations, they're forced to adapt their facilities to accommodate heavier crude oil, which is more polluting and energy-intensive to refine. The energy and environmental implications are causing government agencies, such as the EPA, and environmental groups to try and stop refiners from further expansion. If successful, wholesalers could face supply interruptions as demand increases.
US Demand Down, Economy Largely to Blame - Oil demand was down in the US during the first four months of 2008, signifying lower demand for wholesalers' products. According to the American Petroleum Institute, US oil demand was off 2.4 percent in the first four months of 2008 compared to the same period in 2007. The Energy Information Administration's (EIA) June 2008 short-term energy outlook report forecasts further demand decreases in 2008, primarily due to the tough US economy and record-high gas prices. The EIA expects demand to pick up again in 2009.
Competitive Landscape
Demand for petroleum comes mainly from auto and truck use and home heating. Profitability is determined by the spread between purchase price and selling price and on the volume of product. Most companies are local and operate a single "bulk station" (tank farm), although the large companies may operate a dozen facilities and serve several states. There are economies of scale because large wholesale purchasers generally can negotiate bigger price discounts from suppliers, and because the fixed cost of bulk holding facilities can be spread over a larger number of gallons.
Petroleum Wholesale Distribution Industry Forecast
from Hoover's/D&B subsidiary First Research
Domestic demand for US petroleum production, a driver of petroleum distribution, is forecast to decrease at an annual compounded rate of 3 percent between 2007 and 2012.
Petroleum Demand Growth Volatile
First Research forecasts are based on INFORUM forecasts that are licensed from the Interindustry Economic Research Fund, Inc. (IERF) in College Park, MD. INFORUM's "interindustry-macro" approach to modeling the economy captures the links between industries and the aggregate economy.
First Research Opportunity Rating
The First Research Opportunity Rating is First Research's estimate of industry performance vs. industry risk over the next 12 to 24 months.
- Demand: Driven by high energy prices
- Need careful inventory management
- Risk: Slower economy cuts energy use
Industries Where Colonial Pipeline Competes
- Energy & Utilities
- Oil & Gas Transportation & Storage
- Refined Petroleum Pipelines (primary)
- Oil & Gas Refining, Marketing & Distribution
- Petroleum Bulk Stations & Terminals
- Oil & Gas Transportation & Storage
