Petroleum & Petroleum Products Wholesalers
Buy This Industry Report
Get more in-depth industry information with a First Research industry report containing business challenges, trends, executive insight, call prep questions, and so much more!
Industry Overview
The US petroleum wholesale distribution industry includes about 5,700 companies with annual revenue of about $750 billion. Revenue can vary significantly from year to year with the price of crude oil. Major companies include Getty Petroleum Marketing, Global Partners, Mansfield Oil, Statoil Marketing & Trading, and World Fuel Services. The industry is concentrated: the 50 largest companies generate more than 70 percent of revenue.
Competitive Landscape
Demand for petroleum comes mainly from auto and truck use and home heating. Profitability is determined by the efficiency of operations. 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. Large wholesale purchasers generally can negotiate bigger price discounts from suppliers and spread the cost of bulk holding facilities over a larger number of gallons. The industry is capital-intensive: average annual revenue per employee is over $7 million.
An economic recession or dramatic price fluctuations, such as those that occurred in the first half of 2008, reduce demand for gasoline. Concerns about US dependency on foreign fuel and environmental issues also impact demand. Any decline in demand can adversely affect petroleum distributors.
Products, Operations & Technology
Products include gas (more than 40 percent of industry revenue), diesel fuel and heating oil (about 20 percent), and propane, jet fuel, kerosene, and lubricants. Diesel fuel and heating oil are collectively called "no. 2 distillates."
Operations include storing, transporting, and distributing refined petroleum products. About 60 percent of wholesale distributors operate "bulk plants" (tank farms) from which they distribute product to customers. They may also distribute products directly from their suppliers' "rack" or regional pipeline terminal. Improvements in distribution technology allow some distributors to deliver a greater volume of gasoline directly from the rack, avoiding the risk and expense of holding their own inventory. Distributors usually own and operate a fleet of delivery trucks, although outsourcing the transportation from rack to customer is common. About 40 percent of distributors sell heating oil, according to National Petroleum News.
Some distributors are "quasi-wholesale" because they also sell gasoline at retail. Wholesalers may own and operate convenience stores or other gasoline operations. Major oil companies own about 4 percent of all service stations in the US; the rest are owned by independent owners and petroleum distributors, according to the American Petroleum Institute. Some distributors retail petroleum by supplying and owning the pumps, underground storage tanks (USTs), and other equipment used by independent convenience stores, then sharing in the gasoline profits under what are called special purpose leases.
